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Uncertainty, Electoral Incentives and Political Myopia


  • We thank David Myatt, two anonymous referees, Alberto Alesina, Allan Drazen, Georgy Egorov, Ruben Enikolopov, Nicola Gennaioli, John Moore, Massimo Morelli, Torsten Persson, Giacomo Ponzetto, Marko Terviö, Jaume Ventura, Fabrizio Zilibotti and seminar participants at the NBER Summer Institute PEPF 2010, EDP Jamboree 2010, the CEPR Workshop ‘Politics, Information and the Macroeconomy’, Toulouse School of Economics, Universitat Autonoma de Barcelona, Universidade do Minho, University of Helsinki, IMT, IAE, ENTER Jamboree 2012, RES Meeting 2012, CEPR ESSIM 2012, SED Annual Meeting 2012, EEA Annual Meeting 2012, University of Mannheim and University of Zurich for comments. We also thank Tomaz Cajner for research assistance. Earlier versions of this article were circulated with the title ‘The Political Cost of Reforms’. We acknowledge financial support from the ERC Grant GOPG 240989, the Fundación Ramón Areces and the Ministerio de Ciencia e Inovación (grant ECO2008-04785).


We study the determinants of political myopia in a rational model of electoral accountability with informational frictions and uncertainty. When politicians' ability is ex ante unknown and policy choices are unobservable, elections improve political accountability and selection. However, incumbents underinvest in costly policies with future returns to signal high ability and increase re-election probability. Surprisingly, uncertainty reduces political myopia and may increase social welfare. We also address the socially optimal political rewards and the desirability of a one-term limit. Our predictions are consistent with several stylised facts and with a new empirical observation: aggregate uncertainty is positively correlated with fiscal discipline.

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