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Theoretical Economics Paper
Read My Lips: The Political Economy of Information Transmission
Timothy Besley and Rohini Pande
July 1998
Paper No' TE/1998/355:
Full Paper (pdf)

Tags: political economy; cheap talk; redistribution; development

The paper studies credible information transmission by governments. A group of heterogenous individuals have to make private investment and labour supply decisions while relying on the government for information about investment returns. The government consists of an elected citizen who chooses a redistributive strategy in addition to providing information. We give conditions under which the outcome leads to over- or under-investment in high-return activities and the outcome is Pareto efficient.