Endogenous Present-Biasedness and Policy Implementation

30 Pages Posted: 5 Oct 2006

See all articles by Edwin L.-C. Lai

Edwin L.-C. Lai

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Taiji Furusawa

University of Tokyo

Date Written: August 2006

Abstract

We show that under a two-party political system the party in office tends to be present-biased and time-inconsistent. This may lead to inefficient procrastination of socially beneficial projects. However, procrastination needs not be indefinite. There exist equilibria in which the project is carried out, maybe even in finite time. The procrastination problem tends to get more serious as the cost of the project gets higher. When the cost is low, there is no procrastination problem. When the cost is high, the project can be procrastinated indefinitely, though there exist equilibria in which the project is implemented gradually, with the process going on for a long time.

Keywords: endogenous present-biasedness, hyperbolic discounting, time-inconsistency, procrastination, multi-party political system, policy implementation

JEL Classification: C70, D11, D60, D72, D78, D91

Suggested Citation

Lai, Edwin L.-C. and Furusawa, Taiji, Endogenous Present-Biasedness and Policy Implementation (August 2006). Available at SSRN: https://ssrn.com/abstract=934997 or http://dx.doi.org/10.2139/ssrn.934997

Edwin L.-C. Lai (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
25
Abstract Views
485
PlumX Metrics