Reelection Threshold Contracts in Politics

When politicians are provided with insufficient incentives by the democratic election mechanism, we show that social welfare can be improved by threshold contracts. A threshold incentive contract stipulates a performance level which a politican must reach in order to have the right to stand for reelection. Read my lips would turn into read my contracts. Reelection thresholds can be offered by politicians during campaigns and do not impair the liberal principle of free and anonymous elections in democracies.elections, incentive contracts, democracy

Reelection threshold contracts in politics

We propose to supplement the democratic election mechanism by threshold contracts. A threshold contract stipulates a performance level that a politician must reach in order to obtain the right to stand for reelection. "Read my lips” turns into "read my contract”. Politicians can offer threshold contracts during their campaigns. Equilibrium threshold contracts are welfare improving and do not violate the liberal principle of free and anonymous elections in democracie

Vote-Share Contracts and Learning-by-Doing

We examine the interaction between vote-share contracts and learning-by-doing. Candidates for a political office are allowed to offer vote-share thresholds. The elected politician has to achieve at least this threshold value in his reelection result to remain in office for a second term. We assume there are learningby- doing effects for incumbents and show that competition leads to vote-share contracts implementing the socially optimal threshold, which is above one-half. Vote-share contracts improve the average ability level of a reelected politician and increase effort in the first term of an incumbent. On the other hand, vote-share contracts reduce the probability that learning-by-doing takes place. However, the overall effect of vote-share contracts is welfare-enhancing, even under the assumption of learning-by-doing.elections, political contracts, vote-share thresholds, learning-by-doing effects, incumbency advantage

Competition of Politicians for Incentive Contracts and Elections

When politicians have lower discount factors than voters, democratic elections cannot sufficiently motivate politicians to undertake long-term socially beneficial projects. When politicians can offer incentive contracts which become effective upon reelection, the hierarchy of contracts and elections can alleviate such inefficient decision-making in politics. This mechanism still works if the public cannot commit itself to a reelection scheme or if the public is unsure about the politicians’ time preferences. In the non-commitment case, incentive contracts may need to include a golden parachute clause.Keywords: Incentive contracts, politicians, long-term policies, elections and contracts, golden parachute clauseIncentive contracts, politicians, long-term policies, elections and contracts, golden parachute clause

Contractual Democracy

Recent contributions suggest that introducing political contracts could make liberal democracy more efficient without altering its fundamental values. Such contracts might foster the public 's trust in politics. In this article, we review and structure the current state of affairs on Contractual Democracy. We discuss four archetypes of political contracts and ways of implementing them. We outline the certification and control procedures for political contracts, and address the major concerns arising with regard to Contractual Democrac

On higher hurdles for incumbents

The election mechanism has difficulties in selecting the most able candidates and deselecting less able ones. In a simple model we explore how the power of elections as a selection device can be improved by requiring higher vote thresholds than 50% for incumbents.Third JEL Category: H4Elections, political contracts, vote-share thresholds, incumbents, selection, effort.

A Political Agency Model of Coattail Voting

This paper provides a theoretical model for the coattail effect, where a popular candidate for one branch of government attracts votes to candidates from the same political party for other branches of government. I assume a political agency framework with moral hazard in order to analyze the coattail effect in simultaneous presidential and congressional elections. I show that coattail voting is the outcome of the optimal reelection scheme adopted by a representative voter to motivate politicians' efforts in a retrospective voting environment. I assume that an office-motivated politician (executive or member of congress) prefers her counterpart to be affiliated with the same political party. This correlation of incentives leads the voter to adopt a joint performance evaluation rule, which is conditioned on the politicians belonging to the same party or to different parties. Two-sided coattail effects then arise. On the one hand, an executive's success props up, while failure drags down, her partisan ally in the congressional election, which implies a presidential coattail effect. On the other hand, the executive's reelection itself is affected by a congress member's performance, which results in a reverse coattail effect.Coattail voting; Presidential coattail effect; Reverse coattail effect; Simultaneous elections; Political Agency; Retrospective voting.

Signalling, Incumbency Advantage, and Optimal Reelection Rules

Much literature on political behavior treats politicians as motivated by reelection, choosing actions to signal their types to voters. We identify two novel implications of models in which signalling incentives are important. First, because incumbents only care about clearing a reelection hurdle, signals will tend to cluster just above the threshold needed for reelection. This generates a skew distribution of signals leading to an incumbency advantage in the probability of election. Second, voters can exploit the signalling behavior of politicians by precommitting to a higher threshold for signals received. Raising the threshold discourages signalling effort by low quality politicians but encourages effort by high quality politicians, thus increasing the separation of signals and improving the selection function of an election. This precommitment has a simple institutional interpretation as a supermajority rule, requiring that incumbents exceed some fraction of votes greater than 50% to be reelected.Supermajority, incumbency advantage, signalling

Direct Democracy, Political Delegation, and Responsibility Substitution

Can direct democracy provisions improve welfare over pure representative democracy? This paper studies how such provisions affect politicians’ incentives and selection. While direct democracy allows citizens to correct politicians’ mistakes, it also reduces the incentives of elected representatives to search for good policies. This responsibility substitution reduces citizens’ ability to screen competent politicians, when elections are the only means to address political agency problems. A lower cost of direct democracy induces a negative spiral on politicians incentives, which we characterize by a disincentive multiplier. As a consequence, introducing initiatives or lowering their cost can reduce voters’ expected utility. Moreover, when elections perform well in selecting politicians and provide incentives, this indirect welfare reducing effect is stronger.Direct Democracy, Initiative, Referendum, Political Agency, Delegation JEL Classification Numbers: D72, D78, P16

The Political Resource Curse

The paper studies the effect of additional government revenues on political corruption and on the quality of politicians, both with theory and data. The theory is based on a version of the career concerns model of political agency with endogenous entry of political candidates. The evidence refers to municipalities in Brazil, where federal transfers to municipal governments change exogenously according to given population thresholds. We exploit a regression discontinuity design to test the implications of the theory and identify the causal effect of larger federal transfers on political corruption and the observed features of political candidates at the municipal level. In accordance with the predictions of the theory, we find that larger transfers increase political corruption and reduce the quality of candidates for mayor.government spending, corruption, political selection