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Read my lips : the political economy of information transmission

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  • Besley, Timothy
  • Pande, Rohini

Abstract

The paper studies credible information transmission by governments. A group of heterogenous individuals have to make private investment and labour supply decisions while relying on the government for information about investment returns. The government consists of an elected citizen who chooses a redistributive strategy in addition to providing information. We give conditions under which the outcome leads to overor under-investment in high return activities and the outcome is Pareto efficient.

Suggested Citation

  • Besley, Timothy & Pande, Rohini, 1998. "Read my lips : the political economy of information transmission," LSE Research Online Documents on Economics 2169, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:2169
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    File URL: http://eprints.lse.ac.uk/2169/
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    References listed on IDEAS

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    1. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 85-114.
    2. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    3. Martin J. Osborne & Al Slivinski, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 65-96.
    4. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
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    6. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    7. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    8. Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
    9. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-424, June.
    10. Steven A. Matthews, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 347-369.
    11. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-1235, December.
    12. Abhijit Banerjee & Rohini Somanathan, 2001. "A Simple Model of Voice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 189-227.
    13. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
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    Cited by:

    1. Lagunoff, Roger, 2006. "Credible communication in dynastic government," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 59-86, January.
    2. Heidhues, Paul & Lagerlof, Johan, 2003. "Hiding information in electoral competition," Games and Economic Behavior, Elsevier, vol. 42(1), pages 48-74, January.

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    More about this item

    Keywords

    Political economy; cheap talk; redistribution; development.;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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