Resource title

Ideological polarization, sticky information, and policy reforms

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Resource description

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.

Resource author

Tomer Blumkin, Volker Grossmann

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18912

Resource license

Adapt according to the presented license agreement and reference the original author.