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Seminarios académicos y conferencias

Antoine Loeper, U. Carlos III de Madrid

"Gridlock and Inefficient Policy Instruments"

Coautores: David Austen-Smith, Wioletta Dziuda y Bard Harstad

5 Junio 2018 - 17:00 hrs

Sala 209, Facultad de Ciencias Económicas y Administrativas UC

Abstract: Why do rational politicians choose inefficient policy instruments? Environmental regulation, for example, often takes the form of technology standards and quotas even when cost-effective Pigou taxes are available. To shed light on this puzzle, we present a stochastic game with multiple legislative veto players and show that inefficient policy instruments are politically easier than efficient instruments to repeal. Anticipating this, heterogeneous legislators agreemore readily on an ineffcient policy instrument. We describe when inefficient instruments are likely to be chosen, and predict that they are used more frequently in (moderately) polarized political environments and in volatile economic environments. We show conditions under which players strictly benefit from the availability of the ineffcient instrument.