An Overview Across the New Political Economy Literature

This work presents a review of the literature on political process formation and the role of institutions on economic development. Models of citizen candidacy and candidate choice and equilibria under plurality rule elections are illustrated. Studies of the relation between institutional structure and paths of economic development are also reviewed.Voting Citizens and candidate choices Institutions Economic Development

Equilibrium Agenda Formation

We develop a definition of equilibrium for agenda formation in general voting settings. The definition is independent of any protocol. We show that the set of equilibrium outcomes for any Pareto efficient voting rule is uniquely determined, and in fact coincides with that of the outcomes generated by considering all full agendas. Under voting by successive elimination (or amendment), the set of equilibrium outcomes corresponds with the Banks set. We also examine the implications in several specific settings and show that studying equilibrium agendas can lead to sharp predictions, in contrast with well-known ``chaos'' theorems.agenda, equilibrium, voting, agenda formation

Party Formation and Competition

In the majority of democratic political systems, districts elect representatives, who form coalitions, which determine policies. In this paper we present a model which captures this process: A citizen-candidate model with multiple policy dimensions in which elected representatives endogenously choose to form parties. Numerical analysis shows that in equilibrium this model produces qualitatively realistic outcomes which replicate key features of cross-country empirical data, including variation consistent with Duverger's law. The numbers of policy dimensions and representatives elected per district are shown to determine the number, size, and relative locations of parties. Whilst multi-member district systems are found to reduce welfare.Citizen-Candidate Model; Political Competition; Party Formation; Duverger’s Law; Computer Simulation

EQUILIBRIUM AGENDA FORMATION

We develop a definition of equilibrium for agenda formation in general voting settings. The definition is independent of any protocol. We show that the set of equilibrium outcomes for any Pareto efficient voting rule is uniquely determined. We also show that for such voting rules, if preferences are strict then the set of equilibrium outcomes coincides with that of the outcomes generated by considering all full agendas for voting by successive elimination and show that the set of equilibrium outcomes corresponds with the Banks set. We also examine the implications in several other settings.Agenda ; Equilibrium ; Voting

Stategic Candidacy with Keen Candidates

Presented at the Games, Agents and Incentives WorkshopIn strategic candidacy games, both voters and candidates have preferences over the set of candidates, and candidates make strategic decisions about whether to run an electoral campaign or withdraw from the election, in order to manipulate the outcome according to their preferences. In this work, we extend the standard model of strategic candidacy games to scenarios where candidates may find it harmful for their reputation to withdraw from the election and would only do so if their withdrawal changes the election outcome for the better; otherwise, they would be keen to run the campaign. We study the existence and the quality of Nash equilibria in the resulting class of games, both analytically and empirically, and compare them with the Nash equilibria of the standard model. Our results demonstrate that while in the worst case there may be none or multiple, bad quality equilibria, on average, these games have a unique, optimal equilibrium state

Candidate Quality

We analyze the topical question of how the compensation of elected politicians affects the set of citizens choosing to run. To this end, we develop a sparse and tractable citizen-candidate model of representative democracy with ability differences, informative campaigning and political parties. Our results suggest that primaries, campaign costs and rewards have previously overlooked interactions that should be studied in a unified framework. Surprisingly, increasing the reward may lower the average candidate quality when the campaigning costs are sufficiently high.Politicians' competence; Career concerns; Campaigning costs; Rewards for elected officials; Citizen-candidate models

Businessman Candidates: Special-Interest Politics in Weakly Institutionalized Environments

We initiate examination of the political boundaries of the firm by exploring the phenomenon of “businessman candidates”: business owners and managers who bypass conventional means of political influence to run for public office themselves. We argue that in-house production of political influence will be more likely in institutional environments where candidates find it difficult to make binding campaign promises. When campaign promises are binding, then a businessman may always pay a professional politician to run on the platform that political competition would otherwise compel the businessman to adopt. In contrast, when commitment to a campaign platform is impossible, then candidate identity matters for the policies that will be adopted ex post, implying that a businessman may choose to run for office if the stakes are sufficiently large. We illustrate our arguments through discussion of gubernatorial elections in postcommunist Russia, where businessmen frequently run for public office, institutions to encourage elected officials to keep their campaign promises are weak, and competition for rents is intense.http://deepblue.lib.umich.edu/bitstream/2027.42/40119/3/wp733.pd

Candidate Quality

We analyze the topical question of how the compensation of elected politicians affects the set of citizens choosing to run. To this end, we develop a sparse and tractable citizen-candidate model of representative democracy with ability differences, informative campaigning and political parties. Our results suggest that primaries, campaign costs and rewards have previously overlooked interactions that should be studied in a unified framework. Surprisingly, increasing the reward may lower the average candidate quality when the campaigning costs are sufficiently high. The model accommodates a variety of extensions of which we study costly primaries, two-stage signalling, and ideological differences.politicians’ competence, career concerns, campaigning costs, rewards for elected officials; citizen-candidate models

Essays on relational contracts

This dissertation contains three essays on self-enforcing implicit contracts in economic transactions and politics. Chapter 2 studies a repeated agency model with two tasks where the agent has private information on the first task and there is no verifiable performance signal for the second task. The equilibrium level of the first task is determined so as to guarantee the credibility of the relational contracts to provide incentives for the second task. It implies interesting economic results including non-monotonic relation between the discount factor and the total surplus, social desirability of unverifiability, and implications for organization design. Chapter 3 studies a model of political contribution of dynamic common agency where state-contingent agreements must be self-enforced. First, we investigate the punishment strategy for supporting the self-enforcing mechanism. The most severe punishment strategy on the principals takes the form of a two-phase scheme in general. Second, we characterize the payoff set of the equilibria on which the same decision is chosen by the agent through implicit agreements and examine whether it can achieve the same payoff as in the standard static menu auction model. It implies that there could be an equilibrium outcome in a static menu auction that cannot be supported in our model for any discount factor. Chapter 4 studies repeated political competition with policy-motivated citizen candidates. The dynamic relationship could cause strategic candidacy in two-candidate competition, such as in circumstances where two candidates stand for election and one of them has no chance to win. The candidate can choose her implementing policy depending on the set of the rival candidates in the election and the rival candidate actually has an incentive to stand even with no chance to win since it can induce policy compromises from the winning candidate