29 October 2012
Ex Boccherini - Piazza S. Ponziano 6 (Conference Room )
This paper analyzes how public policy is influenced by threat of political unrest. Unrest is motivated by emotions, such as anger from unfair treatment or violated expectations. If people are sufficiently heterogeneous, protests arise spontaneously as an equilibrium outcome. A benevolent government accepts policy distortions to avoid the social cost of protests. More influential groups are those that can inflict more disruption, can mobilize more easily, have stronger sense of policy entitlements and group identity. In contrast with other existing models of political influence, policy distortions occur even if government has no electoral goal, or even if all groups are identical in political participation. Welfare losses are more acceptable if there are no alternatives and if losses are universally shared. In a dynamic setting, the government exploits this resignation effect to pass economic reforms. But this same mechanism also induces policy procrastination or debt accumulation.