Off-the-peak preferences over government size
reportposted on 04.03.2010, 10:04 by Francisco Martínez-Mora, M. Socorro Puy
We study the political consequences of policy preferences which are non-symmetric around the peak. While the usual assumption of symmetric preferences is innocuous in political equilibria with platforms convergence, it is not neutral when candidates are differentiated. We show that a larger government size emerges when preferences of the median voter off-the-peak are more intense towards overprovision (what we call wasteful preferences), whereas a smaller government results when her preferences are more intense towards underprovision (scrooge preferences). We then analyze the determinants of preferences off the-peak and find that: (i) The sign of the third derivative of the policy-induced utility function indicates whether preferences are wasteful (positive) or scrooge (negative). (ii) The analog of Kimball’s coefficient of prudence can be used to measure degrees of wastefulness and scroogeness. (iii) Consumers’ risk aversion and government decreasing effectiveness in producing the public good generate scrooge preferences, giving some electoral advantage to candidates proposing less public spending.