Institutional Affiliation: Università Bocconi
|Loss Aversion in Politics|
with : w21077
We study loss aversion in majority voting. First, we show a status quo bias. Second, loss aversion implies a moderating effect. Third, in a dynamic setting, the effect of loss aversion diminishes with the length of the planning horizon of voters; however, in the presence of a projection bias, majorities are partially unable to understand how fast they will adapt. Fourth, in a stochastic environment, loss aversion yields a significant distaste for risk, but also a smaller attachment to the status quo. The application of these results to a model of redistribution leads to empirically plausible implications.
Published: Alberto Alesina & Francesco Passarelli, 2019. "Loss Aversion in Politics," American Journal of Political Science, vol 63(4), pages 936-947. citation courtesy of
|Regulation Versus Taxation|
with : w16413
We study which policy tool and at what level a majority chooses in order to reduce activities with negative externalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it. For all instruments the majority chooses levels which are too restrictive when the activity is performed mainly by a small fraction of the population, and when costs for reducing activities or paying taxes are sufficiently convex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax.
Published: Alesina, Alberto & Passarelli, Francesco, 2014. "Regulation versus taxation," Journal of Public Economics, Elsevier, vol. 110(C), pages 147-156. citation courtesy of