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Review of Economics

Jahrbuch für Wirtschaftswissenschaften

Editor-in-Chief: Berlemann, Michael

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Reluctant to Reform? A Note on Risk-Loving Politicians and Bureaucrats

Tobias Thomas
  • Corresponding author
  • EcoAustria – Institute for Economic Research, Austria and Düsseldorf Institute for Competition Economics (DICE), Düsseldorf, Germany
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/ Moritz Heß / Gert G. Wagner
  • German Institute for Economic Research (DIW Berlin) and Max Planck Institute for Human Development (MPIB), Berlin, Germany
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Published Online: 2017-11-30 | DOI: https://doi.org/10.1515/roe-2017-0023

Abstract

From a political economy perspective, politicians often fail to implement structural reforms. In this contribution we investigate if the resistance to reform is based on the differences in the risk preferences of voters, politicians, and bureaucrats. Based on three surveys among the German electorate, 175 members of the Federal German Parliament and 106 officials from German ministries, this is not the case. Since both politicians and bureaucrats have a higher risk appetite than the voters, their risk preferences cannot be seen as an explanation for the resistance to structural reform. Hence, it must be caused by other reasons. These could be interventions by veto players, wars of attrition by powerful interest groups, or reform logjams initiated. However, as during times of populist campaigns, the election process can put forth candidates with very high risk appetites, the constitutions of democracies turn out to be rather effective if hazardous actions and measures by political rookies and gamblers are inhibited by checks and balances.

Keywords: political reforms; political decision-making; principal agent-theory; risk aversion; German; SOEP

JEL Classification: D71; D78; H11; H70; P16; Z13

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About the article

Published Online: 2017-11-30

Published in Print: 2017-11-27


Citation Information: Review of Economics, Volume 68, Issue 3, Pages 167–179, ISSN (Online) 2366-035X, ISSN (Print) 0948-5139, DOI: https://doi.org/10.1515/roe-2017-0023.

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