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Can market failure cause political failure?
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Aney, Madhav S., Morelli, Massimo and Ghatak, Maitreesh (2013) Can market failure cause political failure? Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2013 (Number 122).
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Text (Working paper )
WRAP_122.2013_ghatak.pdf - Published Version Download (608Kb) | Preview |
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
We study how inefficiencies of market failure may be further amplified by political choices
made by interest groups created in the inefficient market. We take an occupational choice
framework, where agents are endowed heterogeneously with wealth and talent. In our model,
market failure due to unobservability of talent endogenously creates a class structure that
affects voting on institutional reform. In contrast to the world without market failure where
the electorate unanimously vote in favour of surplus maximising institutional reform, we find
that the preferences of these classes are often aligned in ways that creates a tension between
surplus maximising and politically feasible institutional reforms.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Alternative Title: | |||||
Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Stock exchanges, Economics -- Mathematical models, Economics -- Political aspects | ||||
Series Name: | CAGE Online Working Paper Series | ||||
Publisher: | Department of Economics, University of Warwick | ||||
Place of Publication: | Coventry, UK | ||||
Official Date: | 2013 | ||||
Dates: |
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Volume: | Volume 2013 | ||||
Number: | Number 122 | ||||
Number of Pages: | 32 | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Date of first compliant deposit: | 1 August 2016 | ||||
Date of first compliant Open Access: | 1 August 2016 |
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