Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/230482
Authors: 
Kishishita, Daiki
Yamagishi, Atsushi
Year of Publication: 
2020
Series/Report no.: 
ISER Discussion Paper No. 1077
Abstract: 
To explore the propagation of undesirable policies in a form of populist extremism, we construct a social learning model featuring agency problems. Politicians in different countries sequentially implement a policy. Voters learn the incumbent politician's type and the desirable policy by observing foreign policies on top of the domestic policy. We show that populist extremism is contagious across countries through the dynamic interaction between the changing public opinion and implemented policies. This structure yields interesting long-run dynamics. First, a single moderate policy could be always enough to stop the domino effect. Second, the persistence of the domino effect depends on the correlation of the desirable policy across countries. In particular, while extremism eventually ends under the perfect correlation, it may become impossible to escape from extremism under the imperfect correlation. These results reveal a new negative aspect of decentralized policymaking.
Subjects: 
Political agency
Yardstick competition
Populism
Observational learning
Signaling
JEL: 
D72
D83
H73
Document Type: 
Working Paper

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