Reluctant to Reform? A Note on Risk-Loving Politicians and Bureaucrats

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Tobias Thomas, Moritz Heß, Gert G. Wagner

In: Review of Economics 68 (2017), 3,

Abstract

From a political economy perspective, politicians often fail to imple-ment structural reforms. In this contribution we investigate if the resistance toreform is based on the differences in the risk preferences of voters, politicians,and bureaucrats. Based on three surveys among the German electorate, 175members of the Federal German Parliament and 106 officials from Germanministries, this is not the case. Since both politicians and bureaucrats have ahigher risk appetite than the voters, their risk preferences cannot be seen as anexplanation for the resistance to structural reform. Hence, it must be caused byother reasons. These could be interventions by veto players, wars of attrition bypowerful interest groups, or reform logjams initiated. However, as during timesof populist campaigns, the election process can put forth candidates with veryhigh risk appetites, the constitutions of democracies turn out to be rathereffective if hazardous actions and measures by political rookies and gamblersare inhibited by checks and balances.

Gert G. Wagner

Senior Research Fellow in der Infrastruktureinrichtung Sozio-oekonomisches Panel



JEL-Classification: D71;D78;H11;H70;P16;Z13
Keywords: political reforms, political decision-making, principal agent-theory, risk aversion, German, SOEP
DOI:
https://doi.org/10.1515/roe-2017-0023