American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Misspecified Politics and the Recurrence of Populism
American Economic Review
vol. 112,
no. 3, March 2022
(pp. 928–62)
Abstract
We develop a dynamic model of political competition between two groups that differ in their subjective model of the data generating process for a common outcome. One group has a simpler model than the other group as they ignore some relevant policy variables. We show that policy cycles must arise and that simple world views—which can be interpreted as populist world views—imply extreme policy choices. Periods in which those with a more complex model govern increase the specification error of the simpler world view, leading the latter to overestimate the positive impact of a few extreme policy actions.Citation
Levy, Gilat, Ronny Razin, and Alwyn Young. 2022. "Misspecified Politics and the Recurrence of Populism." American Economic Review, 112 (3): 928–62. DOI: 10.1257/aer.20210154Additional Materials
JEL Classification
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- K42 Illegal Behavior and the Enforcement of Law