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|Title: ||A theory of government procrastination|
|Authors: ||Furusawa, Taiji|
Lai, Edwin L. -C.
|Issue Date: ||6-Jul-2010 |
|Abstract: ||We present a theory to explain government procrastination as a consequence of its present-bias resulting from the political uncertainty in a two-party political system. We show that under a two-party political system the party in office tends to be present-biased. This may lead to inefficient procrastination of socially beneficial policies that carry upfront costs but yield long-term benefits. However, procrastination is often not indefinite even as we consider an infinite-horizon game. There exist equilibria in which the policy is implemented, and in many cases carried out to completion in finite time. The procrastination problem tends to get more serious as the net social benefit of the policy gets smaller. When the net social benefit is large, there is no procrastination problem. When the net social benefit is small, the policy can be procrastinated indefinitely, though there may co-exist equilibria in which the policy is implemented gradually. When the net social benefit is intermediate in magnitude, there is an array of equilibria, all characterized by some form of procrastination, including gradual implementation. The theory predicts that a government with a more predominant party tends to procrastinate less.|
|Appears in Collections:||ECON Working Papers|
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