Sunset Provisions

A sunset provision is a clause attached to a legislation that specifies a date after which the legislation expires. Sunset provisions are usually advocated for legislative oversight of executive agencies (e.g., U.S. State Sunset Laws) and ex-post evaluation of policies with uncertain effects (e.g., R&D subsidies). By severing the link between today’s policy and tomorrow’s status quo, sunset provisions can also decrease the voting distortions created by this dynamic linkage. In this paper, we analyze a game in which legislators decide not only on what policy change to implement, but also whether to attach a sunset clause to it. We show that sunset provisions will be attached only if the the consensus for the policy change is mild. However, the possibility of using sunsets eliminates the voting distortions completely. Nevertheless, the welfare properties of the sunsets are not unambiguous and depend on the volatility of the environment.