Political cycles: Beyond rational expectations.

ABSTRACT:

Motivation and method

Existing rational expectations models cannot satisfactorily explain why political budget manipulations systematically raise re-election chances and only occur in "specific contexts". This paper offers a theoretical explanation by including unsophisticated voters into an opportunistic political cycle model; unsophisticated voters are unable to take the optimal behaviour of other agents (fully) into account, but may, nonetheless, vaguely suspect government deception.

Results

First, rationally expected manipulations are, on average, fruitless in equilibrium. By including unsophisticated voters we can, however, corroborate empirically found electoral effects of political budget manipulations. Second, unsophisticated voters become anxious and suspicious in a

SUBMITTER: Bohn F 

PROVIDER: S-EPMC6181349 | biostudies-literature | 2018

REPOSITORIES: biostudies-literature