Learning about challengers

We examine a political agency problem in repeated elections where an incumbent runs against a challenger from the opposing party, whose policy preferences are unknown by voters. We first ask: do voters benefit from attracting a pool of challengers with more moderate ideologies? When voters and politicians are patient, moderating the ideology distribution of centrist and moderate politicians (those close to the median voter) reduces voter welfare by reducing an extreme incumbent's incentives to compromise. We then ask: do voters benefit from informative signals about a challenger's true ideology? We prove that giving voters informative, but sufficiently noisy, signals always harm voters, because they make it harder for incumbents to secure re-election.     

A theory of permissible illegal immigration

In many countries laws are not enforced against visibly present illegal immigrants. The visibly present illegal immigrants also tend to be concentrated in particular sectors. We explain such permissible illegal immigration in an endogenous-policy model where selective sector-specific illegality transforms illegal immigrants from non-sectorally specialized to sector-specific factors of production. Under initial conditions where no immigrants are present, the median voter opposes immigration. When, however, a population of illegal immigrants has accumulated, ongoing illegal immigration becomes an endogenous equilibrium policy, at the same time that a majority of voters opposes legal immigration and opposes amnesty that would legalize the immigrants' presence. We also establish a basis for domestic voters preferring that illegal immigrants be employed in service rather than traded-goods sectors.     

Playing for Your Own Audience: Extremism in Two‐Party Elections

This paper considers a two‐party election with a single‐dimensional policy space. We assume that each voter has a higher probability of observing the position of the party he is affiliated with than the position of the other party, an assumption that is consistent with the National Election Studies (NES) electoral data set. In equilibrium, the two parties locate away from the median, because the voters who dislike a party's platform observe its policy choice with a lower probability, and its own audience like policy choices that cater to its taste. As the asymmetry in voter information or the cost of voting increases, the parties adopt more extreme platforms, while if there are fewer extreme voters the opposite effect occurs. Making voters more symmetrically informed about the two parties' platforms increases the welfare of society, while asymmetric information acquisition by the voters is worse than no information acquisition at all.     

LOBBYING AND ELECTIONS

I analyse the interaction between post‐election lobbying and the voting decisions of forward‐looking voters. The existing literature has shown that in models with citizen candidates from a dispersed distribution of preferences, lobbying has no influence on implemented policy. In my model with ideological parties, lobbying is shown to have an effect on policy. In terms of welfare, I show that the median voter and the majority of voters can be better off with lobbying.     

Tax contracts and elections

In this paper we examine the impact of tax contracts as a novel institution on elections, policies, and welfare. We consider a political game in which three parties compete to form the government and voters may behave strategically. Parties have policy preferences about the level of public-good provision and benefit from perks when in office. A government raises taxes for both purposes. We show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government. Moreover, in polarized societies they unambiguously improve the welfare of the median voter.     

Campaign Spending with Office-Seeking Politicians, Rational Voters, and Multiple Lobbies

I introduce a microfounded model of campaign finance with office-seeking politicians, a continuum of voters, and a large number of heterogeneous lobbies. Lobbies make contributions to politicians according to a common agency framework. Politicians use contributions to finance their electoral expenditures. Voters are not fooled by electoral expenditures: they are influenced in a way that is consistent with the equilibrium behavior of lobbies and politicians. The model is used to: (i) determine the relation between campaign spending and the deviation from the median voter's preferred policy; (ii) show the informational value of lobbies' contributions; (iii) evaluate the welfare implications of restricting campaign spending; and (iv) interpret the empirical finding that campaign expenditures have a very low effect on election outcome. Although in equilibrium advertising provides voters with useful information, under reasonable parameter values, a ban on campaign contributions makes the median voter better off. Journal of Economic Literature Classification Numbers: D72, D82, M37.     

Term limits and pork barrel politics

We develop a dynamic model of democratic politics in which both potential office holders and the electorate have heterogeneous ideologies. Voters have incomplete information about candidate ideologies, so they must use information from previous positions taken in office to make informed re-election decisions. We characterize the effects of term limits on the evolution over time of the ideological positions taken by office holders and derive the implications for voter choice and welfare. Contributions of our paper include:

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We detail how pork provision by more senior incumbents interacts with term limits to affect electoral outcomes. Pork provision—transfers of resources from districts with junior legislators to districts with more senior legislators—induces voters to be more forgiving of extreme location by incumbents, especially incumbents in small or poor districts. Pork provision can explain why re-election probabilities in Congress exceed those for governors.

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Term limits reduce voter welfare when all that matters are the ideological positions taken by the office holder.

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Term limits may be advantageous when senior incumbents can extract benefits for their constituencies at the expense of districts with more junior representatives. Large or rich districts especially value term limits when there is substantial pork provision.

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We characterize the welfare of all voters, not just the median voter.

     

Unemployed immigrants and voter sentiment in the welfare state

Adverse voter sentiment can arise when immigrants are unemployed and receive tax-financed income transfers. The explanation for unemployment however determines the consequences for the local population, and an efficiency-wage explanation for unemployment is consistent with mutual benefit to national workers and employers from the presence of unemployed immigrants receiving tax-financed income transfers. The mutual benefit requires credible labor-market disciplining through job offers to immigrants and willingness of immigrants to accept job offers. Acceptance of job offers results in displacement in employment of national workers by immigrants, which can compromise the effectiveness of efficiency wages as a counter to anti-immigrant voter sentiment in the welfare state.     

A Spatial Theory of News Consumption and Electoral Competition

We characterize the optimal editorial positions of the media in a model in which the media influence both voting behaviour and party policies. Political parties are less likely to choose partisan policies when more voters consume informative news. When there are two media outlets, each should be slightly biased relative to its audience in order to attract voters with relatively extreme views. Voter welfare is typically higher under a duopoly than under a monopoly. Two media outlets under joint ownership may provide more diverse viewpoints than two independent ones, but voter welfare is not always higher.     

Design of reforms with time‐inconsistent voters

Widespread agreement that a political reform is necessary is no guarantee that it is actually undertaken in a timely manner. There is often a delay before action is taken and reform packages that would be most efficient to implement all at once are often done only gradually. We propose a theoretical model explaining this behavior and show that when voters have present‐biased, time‐inconsistent preferences, gradualism can arise in equilibrium and be welfare‐enhancing. This is because without the possibility for gradualism, time‐inconsistent voters would delay implementing the reform even more. Using a citizen candidate model, we allow the agenda setter, who decides which reform schedule to put to vote, to be endogenously determined. We show that voters who are aware of their own time inconsistency can use the election of the agenda setter as a commitment device and appoint an agent who is more patient than the median voter in order to avoid full procrastination and to achieve efficiency‐maximizing gradualism.     

Demand of direct democracy

The growing demand for referendum challenges the traditional model of representative democracy. In this paper we study under which conditions voters prefer a system of representative democracy to direct democracy. In direct democracies voters choose a policy among two alternatives, under uncertainty about which policy better fits the realized state of the world; in representative democracies voters select a candidate who, once elected, chooses a policy having observed which is the realized state of the world. Voters and politicians' payoffs depend on a common component which is positive only if the policy fits the state of the world, and on a private ideological bias towards one of the policies. In direct democracies voters are uncertain about the future state of the world, while in representative democracies they are uncertain about the degree of ideological bias of the candidates, even if they know towards which policy each candidate is biased. We show that representative democracy is preferred if (i) the majority of voters are pragmatic (the common component prevails), and (ii) society is ideologically polarized, meaning that the majority of voters are ideological (the private component prevails), but the median voter is pragmatic. Direct democracy is the preferred instrument for collective choices in societies in which the majority of voters and the median voter are ideological, implying that the majority of voters have the same ideological bias, as, for instance, it occurs when the populist rhetoric of people against the elite succeeds.     

Advocacy and political convergence under preference uncertainty

We study the formation of advocacy groups and how they can impact policy outcomes by revealing information about voters׳ preferences to uninformed political candidates. We conduct a laboratory experiment based on a two-candidate spatial electoral competition setting where the policy preferences of voters are (initially) unknown and change over time. In the control treatment candidates learn about the preferred policy of the median voter through the voting outcome of elections. In the advocacy treatments, voters can organize themselves into advocacy groups in order to reveal their policy preferences. We find that voters often overcome the collective action problem of forming an advocacy group. In fact, we observe the formation of both informative advocacy groups, which convey new information, and uninformative advocacy groups, which do not. Overall, advocacy groups significantly speed up the convergence to the preferred policy of the median voter. However, advocacy does not lead to higher earnings as the gains from faster convergence are offset by the costs of group formation.     

Taxation and Policy Change: A Median Voter Model for Australia 1968–69 to 1981–82

This article constructs a median voter model of public expenditure levels, which includes as a central piece of the analysis the costs of expenditure increments to voters in various income groups. These marginal cost-shares or 'tax-prices' are derived from tax data for three separate periods over the larger period under discussion. The levels of spending predicted by the model are compared with the levels of spending that actually prevailed, as a means of checking the median voter model - and in that sense, to investigate the plausibility of one line of reasoning that might be used to explain 'continuity and change' from 1968–69 to 1981–82.     

Is the median voter decisive? Evidence from referenda voting patterns

This paper examines whether the voter with the median income is decisive in local spending decisions. Previous tests have relied on cross-sectional data while we make use of a pair of California referenda to estimate a first difference specification. The referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50% and 67 to 55%, respectively. We find that voters rationally consider future public service decisions when deciding how to vote on voting rules. However, the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules, especially in communities that have a large share of high-income voters with attributes that suggest low demand for public services. Based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending, we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group. This two type model implies that our low demand types (individuals over age 45 with no children) have demands that are 45% lower than other voters. Collectively, these findings are consistent with high-income voters with weak preferences for public educational services voting with the poor against increases in public spending on education.     

Repeated Elections with Asymmetric Information

An infinite sequence of elections with no term limits is modelled. In each period a challenger with privately known preferences is randomly drawn from the electorate to run against the incumbent, and the winner chooses a policy outcome in a one-dimensional issue space. One theorem is that there exists an equilibrium in which the median voter is decisive: an incumbent wins re-election if and only if his most recent policy choice gives the median voter a payoff at least as high as he would expect from a challenger. The equilibrium is symmetric, stationary, and the behavior of voters is consistent with both retrospective and prospective voting. A second theorem is that, in fact, it is the only equilibrium possessing the latter four conditions — decisiveness of the median voter is implied by them.     

Fairness in tax compliance: A political competition model

This paper analyzes the political economy of income redistribution when voters are concerned about fairness in tax compliance. We consider a two‐stage model where there is a two‐party competition over the tax rate and over the intensity of the tax enforcement policy in the first stage, and voters decide about their level of tax compliance in the second stage. We find that if the concern about fairness in tax compliance is high enough, a liberal middle‐income majority of voters may block any income redistribution policy. Alternatively, we find an equilibrium in which the preferences of the median voter are ignored in favor of a coalition formed by a group of relatively poor voters and the richest voters. In this equilibrium income redistribution prevails with no tax enforcement.     

IMPERFECTLY INFORMED VOTERS AND STRATEGIC EXTREMISM

We analyze a two‐candidate Downsian model considering that voters use shortcuts (e.g., interest‐group/media endorsements) to infer candidates' policy platforms. That is, voters do not observe candidates' exact platforms but only which candidate offers the more leftist/rightist platform (relative positions). In equilibrium, candidates' behavior tends to maximum extremism, but it may converge or diverge depending on how voters behave when indifferent policywise between the candidates. When the tie‐breaking rule used by the voters is sufficiently fair, candidates converge to the extreme preferred by the median voter, but when it strongly favors a certain candidate, each candidate specializes in a different extreme.     

SEQUENTIAL OR SIMULTANEOUS ELECTIONS? A WELFARE ANALYSIS

Should all voters vote on the same day or should elections be staggered? Using a model of voting and social learning, we illustrate that sequential elections place too much weight on early states but also provide late voters with valuable information. Simultaneous elections equally weigh states but place too much weight on voter priors, providing an inappropriate advantage to front‐runners. Simultaneous elections are thus preferred if the front‐runner advantage is small, but sequential elections are preferred if the advantage is large. Our quantitative welfare analysis of presidential primaries suggests that simultaneous systems slightly outperform sequential systems.     

Growth, Inequality, and Integration: A Political Economy Analysis

The issue of political integration between two countries (more generally two political constituencies) for economic reasons is studied within the context of a simple endogenous growth model with a productive public good financed by taxation. We consider two countries that initially differ in terms of average endowment, size, and inequality. Because taxation affects the distribution of income both within and between countries, we are able to show how integration impacts it over the entire time horizon. The decision to integrate or not is made by the two national median voters. We establish the net gain for any individual in any country derived from integration and offer a simple decomposition of this gain. It is then proven that even though integration generates aggregate gains for both countries through an endogenous growth mechanism related to size, it may be in the interest of either median voter not to vote for integration given the transformation in the inequality schedule it implies. Surprisingly, even the poorer median voter may vote against integration. Turning to the process of union building, we prove that, once it is decided, integration is irreversible. Countries may initially decide against integration yet be willing to reverse this decision in a subsequent period.     

Endogenous institutions and political extremism

The election of extreme political leaders is often associated with changes in political institutions. This paper studies these phenomena through a model in which the median voter elects a leader anticipating that he will impose institutional constraints—such as constitutional amendments, judicial appointments, or the implicit threat of a coup—that influence the behavior of future political challengers. It is typically optimal for the median voter to elect an extreme incumbent when democracy is less fully consolidated, when the costs of imposing institutional constraints are intermediate, and when the distribution of potential challengers is asymmetric. The median voter typically elects a more right-wing incumbent when the distribution of potential challengers shifts to the left. Implications of the model for the consolidation of democracy and institutional constraints are discussed, as are several related mechanisms through which politiciansʼ ability to affect institutions may lead voters to optimally elect extremists.