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Ideological Polarization, Sticky Information, and Policy Reforms

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  • Tomer Blumkin
  • Volker Grossmann

Abstract

We develop a dynamic two-party political economy framework, in which parties seek to maximize vote share and face the trade-off between catering to their respective core constituencies on the one hand and ‘middle of the road’ voters with no partisan affiliation on the other hand. In contrast to ideology-driven individuals, ‘middle of the road’ voters care about the state of the economy in the sense that a policy reform is desirable for them when the fundamentals of the economy change. However, information is “sticky” in the sense that the process of information diffusion about the state of the economy, which is determined by some exogenous stochastic process, is imperfect. Contrary to conventional wisdom, we show that an increase in ideological polarization may enhance social welfare by mitigating the friction in information flow.

Suggested Citation

  • Tomer Blumkin & Volker Grossmann, 2004. "Ideological Polarization, Sticky Information, and Policy Reforms," CESifo Working Paper Series 1274, CESifo.
  • Handle: RePEc:ces:ceswps:_1274
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    References listed on IDEAS

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    Cited by:

    1. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2004. "EU Merger Control in Differentiated Product Industries," CESifo Working Paper Series 1312, CESifo.
    2. Aleksander Berentsen & Esther Bruegger & Simon Loertscher, 2005. "Learning, voting and the information trap," Diskussionsschriften dp0516, Universitaet Bern, Departement Volkswirtschaft.

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    Keywords

    ideological polarization; sticky information; partisanship; policy reform;
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