Adverse Selection in Distributive Politics

58 Pages Posted: 12 May 2020

See all articles by S. Nageeb Ali

S. Nageeb Ali

Pennsylvania State University

Maximilian Mihm

New York University (NYU) - Abu Dhabi

Lucas Siga

Department of Economics, University of Essex

Date Written: December 16, 2018

Abstract

Many policy reforms involve gains for some voters at a cost borne by others, and voters may be asymmetrically informed about who gains and loses. This paper shows that the interaction of distributive politics and asymmetric information generates an adverse selection effect: when an uninformed voter contemplates many other voters supporting a policy, she suspects that she is unlikely to benefit from it. This suspicion induces voters to reject policies that would be selected if all information were public. We identify a form of "negative correlation" that is necessary and sufficient for this electoral failure.

Keywords: Distributive Politics, Information Aggregation, Polarization

JEL Classification: D7

Suggested Citation

Ali, S. Nageeb and Mihm, Maximilian and Siga, Lucas, Adverse Selection in Distributive Politics (December 16, 2018). Available at SSRN: https://ssrn.com/abstract=3579095 or http://dx.doi.org/10.2139/ssrn.3579095

S. Nageeb Ali

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Maximilian Mihm

New York University (NYU) - Abu Dhabi ( email )

Abu Dhabi
United Arab Emirates

Lucas Siga (Contact Author)

Department of Economics, University of Essex

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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