Electoral Competition and Policy Feedback Effects.

Some government policies can systematically influence citizens' acquisition of economic information. Since voters evaluate policy platforms in light of this information, politicians might exploit these policy feedback effects to shape voter's future policy preferences to their advantage. We illustrate this logic in the context of government subsidies to property ownership. Using an extension of the Romer-Meltzer-Richard model with imperfect information about the economy, we show how subsidies to ownership of real estate--such as mortgage interest deductions or discounted sales of public housing--produce an electorate that is systematically less favorable to redistributive taxation. The resulting political complementarity between home subsidies and fiscal conservatism is consistent with several empirical regularities. [ABSTRACT FROM AUTHOR]