DP12797 Policy Experimentation, Redistribution and Voting Rules

Author(s): Vincent Anesi, T. Renee Bowen
Publication Date: March 2018
Keyword(s): Committees, Endogenous Status Quo, Experimentation, redistribution, reforms, Voting rules
JEL(s): C73, C78, D61, D71, H23
Programme Areas: Public Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12797

We study conditions under which optimal policy experimentation can be implemented by a committee. We consider a dynamic bargaining game in which, each period, committee members choose to implement a risky reform or implement a policy with known returns. We first show that when no redistribution is allowed the unique equilibrium outcome is generically inefficient. When committee members are allowed to redistribute resources (even arbitrarily small amounts), there always exists an equilibrium that supports optimal experimentation for any non-collegial voting rule. With collegial voting rules, however, optimal policy experimentation is possible only with a sufficient amount of redistribution. We conclude that veto rights, not constraints on redistribution, constitute the main obstacle to optimal policy experimentation.