What Drives Unequal Policy Responsiveness? Assessing the Role of Informational Asymmetries in Economic Policy-Making

• DOI: 10.1177/0010414020912282
• Published date: 01 December 2020
• Author: Mads Andreas Elkjær
• Date: 01 December 2020
• Subject Matter: Articles

https://doi.org/10.1177/0010414020912282

Comparative Political Studies

2020, Vol. 53(14) 2213 –2245

© The Author(s) 2020

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DOI: 10.1177/0010414020912282

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Article

What Drives Unequal

Policy Responsiveness?

Assessing the Role

of Informational

Asymmetries in

Economic Policy-Making

Mads Andreas Elkjær1

Abstract

Recent scholarship on inequality and political representation argues that

economic elites are dominating democratic policy-making, yet it struggles

to explain the underlying mechanisms. This article proposes that unequal

responsiveness reflects asymmetries in information about fiscal policy across

income classes, as opposed to being a structural bias inherent in capitalist

democracy. I test the argument in a pathway case study of economic policy-

making in Denmark, using a new data set that combines preference and

spending data spanning 18 spending domains between 1985 and 2017.

I find that governments that pursue standard macroeconomic policies

coincidentally respond more strongly to the preferences of the affluent,

owing to a closer adjustment of preferences to the state of the economy

among citizens in upper income groups. These findings have important

democratic and theoretical implications, as they suggest that unequal

responsiveness may not reflect substantive misrepresentation of majority

interests, but rather differences in information levels across groups.

Keywords

political representation, inequality, responsiveness, democracy

1University of Oxford and Nuffield College, Oxford, United Kingdom

Corresponding Author:

Mads Andreas Elkjær, Department of Politics and International Relations, University of

Oxford, Manor Road Building, Manor Road, Oxford OX1 3UQ, United Kingdom.

Email: mads.elkjaer@politics.ox.ac.uk

912282CPSXXX10.1177/0010414020912282Comparative Political StudiesElkjær

research-article2020

2214 Comparative Political Studies 53(14)

Introduction

Rising inequality has raised concerns that the power of moneyed interests is

undermining democracy. In the United States, the economic elite appears to

dominate policy-making, arguably an effect of money in politics (Bartels,

2008; Gilens, 2012; Gilens & Page, 2014).1 In other advanced democracies,

where political parties are far less reliant on private donations, scholars find

strikingly similar patterns of unequal representation, and point to disparities

in political participation and descriptive representation as possible causes

(Bartels, 2017; Elsässer et al., 2018; Peters & Ensink, 2015; Schakel, 2019).

Participational and descriptive disparities can clearly create some degree of

inequality in political representation, but considering the strong electoral

incentives of policy makers to represent low- and middle-class interests

(Downs, 1957), it seems implausible that such disparities can lead to eco-

nomic-elite domination of the democratic process. As it stands, the literature

presents strikingly similar results across widely different political–economic

contexts, yet it struggles to explain the underlying mechanisms.

Tracing the mechanisms is of crucial importance, because they determine

the implications of the results. Elkjær and Iversen (2020) argue that differen-

tial responsiveness may simply reflect that high-income groups are better

informed about fiscal policies, and therefore adjust their preferences more in

line with standard macroeconomic policies. They find across a broad range of

advanced democracies that while changes in redistributive policies reflect the

short-term preferences of the rich, the levels of these policies reflect the long-

run interests of the middle class. This result indicates that asymmetries in

information may be causing the similarity in results, since existing studies

examine short-term policy trends, but it is difficult to rule out any impact of

structural biases.

In this article, I test the informational asymmetry argument in a pathway

case with the aim of discerning the causal mechanisms of differential

responsiveness. Informational asymmetries exist in any democracy because

information is closely tied to education and to incentives to be informed,

which rise with income (Downs, 1957; Larcinese, 2005). This implies that

the affluent express more counter-cyclical spending preferences (Kölln,

2018) and are more attentive to spending flows (Wlezien & Soroka, 2011),

which opens the door to the possibility that differential responsiveness may

be a consequence of governments adopting optimal fiscal policies, while

citizens in different income groups update their preferences more or less in

line with these policies. Unequal policy responsiveness, therefore, may

partly be coincidental, rather than reflective of a substantive overrepresen-

tation of the interests of the rich.

Elkjær 2215

Structural features of capitalist democracy, of course, may also bias politi-

cal representation, which makes it difficult to isolate the impact of informa-

tion. To minimize equality-distorting effects of the political–economic context,

I examine economic policy-making in Denmark, where conditions favor equal

representation. Policy makers have good possibilities to provide equal respon-

siveness when adjusting spending, since conflict is relatively restricted

(Gilens, 2009; Soroka & Wlezien, 2008). And the Danish case offers some of

the most favorable conditions for political equality, including high levels of

economic equality and redistribution, proportional representation (PR), a

coordinated market economy, and state-funded political parties. In Denmark,

therefore, it is highly unlikely that economic policy-making is dominated by

the economic elite. Any such finding would be a strong indication that some-

thing else than structural biases of capitalist democracy is driving the results.

I rely on a new data set that combines preference and spending data span-

ning 18 spending domains from 1985 to 2017. In striking similarity to studies

of other contexts, I find that also in Denmark policy responsiveness increases

monotonically with income. I then show that this effect of income on respon-

siveness closely resembles those of income on political discussion, informa-

tion, and preference formation. Specifically, the affluent are more involved in

political discussions; they are better informed about political and economic

issues; and they express more balanced, thermostatic, and counter-cyclical

preferences compared with lower income classes. Whereas the structural fea-

tures of the Danish political system are wholly unable to explain the observed

pattern of unequal responsiveness, the findings are fully consistent with the

informational asymmetry argument.

I proceed as follows. First, I discuss expectations about political represen-

tation and present the argument. I then introduce the case and data, followed

by the empirical results. I conclude with a discussion of alternative explana-

tions and the broader implications of the findings.

The Political Representation of Economic Interests

In the ideal democracy, policy makers respond equally to the preferences of

citizens (Dahl, 1971). But unless all citizens hold similar preferences, politi-

cal representation cannot be entirely equal, and policy decisions should

instead be based on majority rule (Dahl, 2006). Majority rule implies that the

median voter is pivotal, since she must be included in any majority decision

(Downs, 1957). A fair amount of work shows that policy makers respond to

majority demands (e.g., Brooks & Manza, 2006; Hobolt & Klemmensen,

2008; Rasmussen et al., 2019; Soroka & Wlezien, 2010). But these studies