George Street Mews
Oxford OX1 2AA
Merit, Luck and Accountability – How asymmetric information about exogenous shocks affects agent’s efforts
There is evidence that citizens in developing democracies vote based on retrospective evaluations of the economy, even in countries where economic performance is largely determined by exogenous shocks. Yet there are reasons to believe that, differently from voters, incumbents are aware of these shocks. This asymmetry leads us to expect that in periods of large positive or negative shocks, when electoral results will hardly depend on incumbent’s actions, their incentive is to deviate efforts away from welfare maximization and towards rent-seeking activities.