American Political Science Review

Research Article

Dynamic Government Performance: Honeymoons and Crises of Confidence

TORUN DEWANa1 c1 and DAVID P. MYATTa2 c2

a1 London School of Economics and Political Science

a2 London Business School

Abstract

We use a formal theoretical framework to explore the interplay between a government's longevity and its performance. Ministers perform well when their careers are valuable; this is so when the government's duration is expected to be long; the government's survival depends on its popularity; and, finally, that popularity depends on its ministers’ performance. The feedback loop between performance and longevity means that multiple rational-expectations equilibria can arise: Ministers work hard for a popular government, but divert efforts elsewhere if they believe the government is doomed; these alternatives are both self-fulfilling prophecies. However, the presence of (perhaps small) random events that buffet the performance and popularity of a government is sufficient to pin down a unique equilibrium. We explore the dynamics that arise: A crisis of confidence involving the rapid collapse of a government's performance is sparked when a sequence of negative shocks push the popularity of the government below a unique critical threshold.

Correspondence:

c1 Torun Dewan is Professor in Political Science, London School of Economics and Political Science, Houghton Street, London WC2A 2AE United Kingdom (t.dewan@lse.ac.uk).

c2 David P. Myatt is Professor of Economics, London Business School, Regent's Park, London NW1 4SA United Kingdom (dmyatt@london.edu).

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