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.     

Manipulation through political endorsements

We study elections with three candidates under plurality voting. A candidate is a Condorcet loser if the majority of the voters place that candidate at the bottom of their preference rankings. We first show that a Condorcet loser might win the election in a three-way race. Next we introduce to the model an endorser who has private information about the true probability distribution of the preferences of the voters. Observable endorsements facilitate coordination among voters who may otherwise split their votes and lead to the victory of the Condorcet loser. When the endorser has an ideological bias towards one of the candidates, the coordination impact of endorsements remains unaltered, moreover the endorser successfully manipulates the outcome of the election in favor of his bias, even if his ideological bias is known by the voters. The results are true for any endorsement cost and any magnitude of bias as long as the electorate is large enough.     

Set them (almost) free: Discretion in electoral campaigns under incomplete information

The paper analyzes a model of electoral campaigning as a problem of competitive delegation. We consider an environment characterized by two sources of uncertainty: uncertainty on the nature of the optimal policy and uncertainty on the candidates’ biases. Although voters know whether the candidate is left‐ or right‐wing, they do not know the extent of the bias. In this environment, discretion may benefit voters as it allows the elected politician to adjust his policies to the state of the world. The paper shows that the optimal set of promises must be a closed interval, whose size is decreasing in the expected bias of the candidate. An example where the set of types is finite shows that an increase in the variability of candidates’ types may either increase or decrease the voters’ willingness to grant discretion to politicians.     

The political economy of naturalization

This paper presents a political economy model in which self‐interested natives decide when citizenship and/or voting rights should be granted to foreign‐born workers. Native voters know that immigrants hold different ‘political’ preferences and would thus tend to postpone their enfranchisement as much as possible. They also consider, however, that a more restrictive naturalization policy may reduce the gains from immigration. We find that the optimal timing of naturalization depends on the quantity, quality (productivity), and preferences of potential immigrants, the political composition and the age structure of the native population, as well as the sensitivity of migration choices to the citizenship issue.     

Media as watchdogs: The role of news media in electoral competition

We develop an equilibrium model to analyze the role of the media in electoral competition. When policy payoffs are state-dependent, party policies do not converge to the median voter's ideal policy if the media report only party policies. News analysis about the state, though possibly biased, can discipline off-equilibrium deviations and make the parties adopt more centrist policies. Since voters are rational, the party favored by the media need not win with a higher probability. Instead, media bias may reduce the effectiveness of electoral competition and lead to more polarized policies.     

Political Resource Allocation: Benefits and Costs of Voter Initiatives

This article explores the benefits and costs of the voter initiative,a direct democracy device that allows policy decisions to bemade by voters rather than their elected representatives. Previousresearch suggests that by introducing "competition" into theproposal process, the initiative leads to policies that arecloser to the median voter's ideal point. In our model, in contrast,the effect of the initiative is conditional on the severityof representative agency problems and uncertainty about voterpreferences. The initiative always makes the voter better offwhen representatives are faithful agents, but when voter preferencesare uncertain, initiatives can cause "shirking" representativesto choose policies farther from the voter's ideal point. Ourevidence shows that initiatives are more common in states withheterogeneous populations, and initiatives reduce state spendingwhen Democrats control the government and when citizens havediverse preferences.     

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.     

Impact of electoral competition,swing voters and interest groups on equilibrium policy platforms: Exploring the strategic forces at work

This paper constructs a stylized model of election between two opportunistic candidates who can influence equilibrium policy platforms in exchange for monetary contributions provided by two distinct lobby groups. Two key features are embedded which give rise to a dual uncertainty in the model: the existence of partisan spread across voter groups as well as the embezzlement of campaign funds received by the electoral candidates from the interest groups. We derive and compare the equilibrium platforms of the two office-seeking candidates in three scenarios: none of the above uncertainties exist (benchmark case), only uncertainty about voters’ preferences exist (swing-voter case), and both the uncertainties exist (swing voters and lobby groups case). We find that an opportunistic candidate’s swing-voter tax platform is always lower than the benchmark tax platform. Additionally, the equilibrium tax choice of electoral contenders in the swing voters and opposing lobby groups case is found to be greater than the tax level chosen under the swing-voter case if the lobby group advocating a greater level of tax is sufficiently well-organized such that it outweighs the relative swing-voter effect in that group. Furthermore, we find that when an electoral candidate transitions from being highly corrupt to becoming relatively more honest, the equilibrium level of public good provision adjusts in conformity with the well-organized group’s economic preferences. Finally, if the strength of relative lobbying effect is weaker, a lower partisan bias within that group induces an electoral candidate to choose a tax platform closer to that group’s policy bliss point.     

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.     

Redistribution under general decision rules

We study the political economy of redistribution over a broad class of decision rules. We suggest a simple and elegant procedure to select a robust equilibrium from the multiplicity in the core. Equilibrium policy depends on the full income profile, and, importantly, the preferences of two decisive voters. We show that the effect of increasing inequality depends on the decision rule and the shape of the income distribution; redistribution will increase if both decisive voters are “relatively poor,” and decrease if at least one is sufficiently “rich.” Additionally, redistribution decreases as the polity adopts increasingly stringent super-majority rules.     

Partisan politics and election failure with ignorant voters

We analyze candidate competition when some voters do not observe a candidate's policy choice. Voters have a personality preference when both candidates offer the same policy. In equilibrium, the candidate with a personality advantage may get elected with a partisan policy even though his opponent's policy is preferred by all voters. The departure from the Downsian prediction is most pronounced when candidates have a weak policy preference and care mostly about winning the election. In that case, uninformed voters choose the candidate with the preferred personality even if electing this candidate implies a lower payoff on average.     

Monetary Policy, Delegation and Polarisation

This paper studies the relation between political polarisation and delegation of stabilisation policy. There is asymmetric information about how the economy works: unlike voters, two political parties know the variance of an employment shock. Prior to an election each party proposes a central banker to be chosen if the party wins. If political polarisation is small, voters will learn the true variance and the central banker and the stabilisation policy are the ones most preferred by the median voter. If the political polarisation is high, stabilisation policy does not reflect the variance but only the preferences of the winning party.     

Existence of a Condorcet Winner When Voters Have Other‐Regarding Preferences

In standard political economy models, voters are “self‐interested” that is, care only about “own” utility. However, the emerging evidence indicates that voters often have “other‐regarding preferences” (ORP), that is, in deciding among alternative policies voters care about their payoffs relative to others. We extend a widely used general equilibrium framework in political economy to allow for voters with ORP, as in Fehr and Schmidt (1999) . In line with the evidence, these preferences allow voters to exhibit “envy” and “altruism,” in addition to the standard concern for “own utility.” We give sufficient conditions for the existence of a Condorcet winner when voters have ORP. This could open the way for an incorporation of ORP in a variety of political economy models. Furthermore, as a corollary, we give more general conditions for the existence of a Condorcet winner when voters have purely selfish preferences.     

Experimental study of cursed equilibrium in a signaling game

The laboratory experiment described in this paper provides evidence on play in signaling games in the context of electoral competition. In this game, voters must infer the preferred policy of each candidate from the candidate’s choice of whether to announce (truthfully) his preferred policy or to take no position. Bayesian voters would put high probability on a candidate having an extreme policy preference after observing him take no position, but cursed voters would not fully appreciate the informational content of the decision to take no position. Stated beliefs reveal substantial uncertainty about other players’ strategies. Based on estimates of a structural model of cursed equilibrium allowing for heterogeneity in the degree of cursedness, 32% of choices between candidates are consistent with Bayesian updating, 32% imply no inferences about others’ types after observing their actions, and the remainder indicate partial updating. Though the experiment also includes treatments with subjects in both roles, these estimates are based on interactions with programmed candidates, implying that uncertainty about others’ rationality and strategic sophistication is not driving the result. We also find that the quantal response error structure in which errors depend on payoff differences cannot explain the pattern of errors that subjects make.     

Inefficient policies and incumbency advantage

We present a model of (re)elections in which an incumbency advantage arises because the incumbent can manipulate issue salience by choosing inefficient policies in the policy dimension in which he is the stronger candidate. The voters are uncertain about the state of the world and the incumbent's choice of policy. Under complete information they would reelect the incumbent if and only if the state is sufficiently high. Undesirable policy outcomes may be due to either a bad state or the incumbent's choice of inefficient policies. The incumbent uses inefficient policies in intermediate states, whereby he creates uncertainty about the true state in such a way that voters are better off in expectation reelecting him. Hence the equilibrium exhibits an incumbency advantage that stems from asymmetric information and the use of inefficient policies.     

Redistributive policies with heterogeneous social preferences of voters

There is growing evidence on the roles of fairness and other-regarding preferences as fundamental human motives. Call voters with fair preferences, as in Fehr and Schmidt (1999), fair-voters. By contrast, traditional political economy models are based on selfish-voters who derive utility solely from “own” payoff. In a general equilibrium model with endogenous labor supply, a mixture of fair and selfish voters choose optimal policy through majority voting. First, we show that majority voting produces a unique winner in pairwise contests over feasible policies (the Condorcet winner). Second, we show that a preference for greater fairness leads to greater redistribution. An increase in the number of fair voters can also lead to greater redistribution. Third, we show that in economies where the majority are selfish-voters, the decisive policy could be chosen by fair-voters, and vice versa. Fourth, while choosing labor supply, even fair voters behave exactly like selfish voters. We show how this apparently inconsistent behavior in different domains (voting and labor supply) can be rationalized within the model.     

On the robustness of laissez-faire

This paper considers a model economy in which agents are privately informed about their type: their endowments of various goods and their preferences over these goods. While preference orderings over observable choices are allowed to be correlated with an agent's private type, we assume that the planner/government is both uncertain about the nature of this joint distribution and unable to choose among multiple equilibria of any given social mechanism. We model the planner/government as having a maxmin objective in the face of this uncertainty.Our main theorem is as follows: Once we allow for this kind of uncertainty and assume no wealth effects in preferences, the uniquely optimal social contract is laissez-faire, in which agents trade in unfettered markets with no government intervention of any kind.     

The Politics of Inequality as Organised Spectacle: Why the Swiss Do Not Want to Tax the Rich

In 2015, Swiss voters had the opportunity to impose a tax on the super rich in a popular vote and thereby fund a redistributive policy. However, a large majority voted against its seemingly obvious self-interest and rejected the tax. We propose an explanation for this puzzling outcome, bridging the usually separate behavioralist and institutionalist perspectives on the politics of inequality. We start from the observation that political economy tends to neglect processes of preference formation. Theorising preferences as socially constructed, we show that interest groups played a major role in shaping the outcome of the vote. Business frames were multiplied through allied parties and the media and had a major impact on individual voting behaviour. In addition, we demonstrate that interest groups representing business interests derive the content of their communication from business’s structurally privileged position in the capitalist economy. Specifically, creating uncertainty about possible perverse effects of government policies on jobs and growth is a powerful tool to undermine popular support. Frames based on this structural power ultimately explain why the Swiss refrained from ‘soaking the rich.’     

Information,polarization and term length in democracy

This paper considers term lengths in a representative democracy where the political issue divides the population on the left–right scale. Parties are ideologically different and better informed about the consequences of policies than voters are. A short term length makes the government more accountable, but the re-election incentive leads to policy distortion as the government seeks to manipulate swing voters' beliefs to make its ideology more popular. This creates a trade off: A short term length improves accountability but gives distortions. A short term length is best for swing voters when the uncertainty is large and parties are not very polarized. Partisan voters always prefer a long term length. When politicians learn while in office a long term length becomes more attractive for swing voters.     

Last Minute Policies and the Incumbency Advantage

This paper models a purely informational mechanism behind the incumbency advantage. In a two‐period electoral campaign with two policy issues, an incumbent and a possibly more competent challenger compete for election by voters who are heterogeneously informed about the state of the world. Due to the asymmetries in government responsibility between candidates, the incumbent's statement may convey information on the relevance of the issues to voters. In equilibrium, the incumbent sometimes strategically releases his statement early and thus signals the importance of his signature issue to the voters. We find that, since the incumbent's positioning on the issue reveals private information which the challenger can use in later statements, the incumbent's incentives to distort the campaign are decreasing in his quality, as previously documented by the empirical literature. The distortions arising in equilibrium are decreasing in the incumbent's true competence; however, the distortions may be increasing in the incumbent's expected competence on his signature issue.