The Stakes and Informativeness Trade-Off: Electoral Incentives to Implement Programmatic Transfers
Posted: 5 Aug 2020 Last revised: 29 Apr 2021
Date Written: August 24, 2020
If a transfers policy is programmatic (it is transparent and non-manipulable), is it irrelevant for politicians' electoral fortunes? I show that the answer is no with a political agency model where politicians' competence is uncertain to all. In my setup, an incumbent can allocate a budget to public goods and transfers. These policies differ in one key dimension: the provision of public goods fluctuates more over time relative to transfers. When the incumbent increases the budget to public goods, two effects arise: his performance in office today reveals more information about his identity (an informativeness effect), and voters' anticipation of narrow transfers tomorrow increases the salience of political selection (a stakes effect). To the incumbent, these two effects move in opposing directions and, consequently, the strategic allocation of the budget helps him to advance his electoral fortunes.
Keywords: Elections, Experimental Design, Information, Public Goods, Transfer
JEL Classification: C90, D72, D82, D83, H41, I38
Suggested Citation: Suggested Citation