Parikshit Ghosh and Rohini Somanathan, DSE
Centre for Development Economics
and
Department of Economics, Delhi School of Economics
ANNOUNCE A SEMINAR
The Lottery of Life and Policy Persistence
by
Parikshit Ghosh and Rohini Somanathan
Department of Economics, Delhi School of Economics, University of Delhi
Thursday, 27th August 2015 at 3:00 PM
Venue : Seminar Room (First Floor)
Department of Economics, Delhi School of Economics
All are cordially invited
Abstract
This paper offers a new framework for understanding political failure in democracies. Infinitely lived agents choose a policy every period via majority voting. Voters' payoffs are subject to idiosyncratic and transient stochastic shocks. In Markov perfect equilibria, there may be inefficient and stochastic delays in the adoption of policies that are better for a majority of voters in the long run. There is also policy persistence: a policy is more likely to be chosen when it is the status quo. Reduced economic mobility generates political pressure against redistribution and holding elections less frequently may increase welfare. We discuss several applications, including social security, universal health care, unemployment benefits and technological change.