Aggregate uncertainty about reform outcomes strengthens status quo bias

Evidence

So, to the extent that with no aggregate uncertainty (A = 0) and for given M the reform would not be blocked, then more uncertainty decreases the effect of increasing M; that is it increases a status quo bias14. The statusquo bias effect in turn implies that an increase in aggregate uncertainty of the reform outcome, measured by A, should reduce insulation: a higher A reduces the extent to which increasing insulation helps increasing the probability of reform while the expropriation cost of increasing insulation remains unaffected by A. — Philippe Aghion, Alberto Alesina, and Francesco Trebbi, Endogenous Political Institutions, 87

Categorization

• DEFINE: Clarifies ‘status quo bias’ as used here: greater uncertainty weakens the payoff from raising insulation M, making blocking more likely.
• XREF: Connects to Fernandez and Rodrik (1990) and the broader literature on why voters reject reforms that would ex post benefit majorities.