Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127500
Authors: 
Berentsen, Aleksander
Bruegger, Esther
Loertscher, Simon
Year of Publication: 
2005
Series/Report no.: 
WWZ Forschungsbericht 03/05
Abstract: 
We consider a median voter model with uncertainty about how the economy functions. The distribution of income is exogenously given and the provision of a public good is financed through a proportional tax. Voters and politicians do not know the true production function for the public good, but by using Bayes rule they can learn from experience. We show that the economy may converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap.
Subjects: 
Political economy
Meltzer-Richard model
Bayesian learning
JEL: 
D72
H10
D83
Document Type: 
Research Report

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