Political economy of anti-corruption reform in two-candidate elections

We analyze the effectiveness of some commonly discussed anti--corruption reforms on political corruption, using a theoretical model of competition between two candidates in a probabilistic voting setup. Candidates, who may differ both in their ability to produce the public good, and popularity with voters, propose a tax rate and a public good level. The budget constraint implies that taxes collected must equal the sum of funds used in public good production plus funds stolen by the elected politician. We identify the conditions under which constitutional constraints on policies, higher penalties for corruption, and higher wages for elected politicians increase (or decrease) voters' welfare. We discuss how the asymmetric information and the rigidity of constitutions reduce the effectiveness of the reforms, and how distributional effects of reforms may reduce the voters' support for a welfare--improving reform. Finally, we argue that effective reforms may not be proposed by both corrupt and honest politicians.Political Agency; Constitutional Design; Political Economy of Reform

A Game-Theoretic Explanation for the Persistence of Political Corruption

Using a theoretical model of two-candidate competition, I study the political support for a fully effective and costless reform targeting high level political corruption. I find that when the candidates have a high discount factor, and when the level of political corruption is not too low, both corrupt and honest candidates have incentives to oppose the reform. I also find that a fully informed and fully coordinated electorate can change a candidate's incentives by bundling the reform with high wages and by voting strategically.Political Corruption; Political Economy of Anti-Corruption Reform

Mackerels in the moonlight. A model of corrupt politicians

This paper examines causes of the persistence of corruption among elected politicians in democracies. We study a theoretical model of competition between two candidates who differ both in ability and popularity in a probabilistic voting setup. Each candidate proposes a tax rate and a public good level. The elected candidate's ability determines the cost of producing the public good. The budget constraint implies that taxes collected must equal the sum of public good cost and the amount stolen by the elected politician. We solve for the tax rates chosen by the candidates and how much each candidate chooses to steal depending on his ability and popularity. We, then, analyze the effects of various commonly discussed reforms as potential ways of deterring political corruption. We identify conditions under which (i) imposing tax rate limits, (ii) increasing compensation of elected politicians, and (iii) raising legal penalties for corruption, will increase corruption and/or reduce the social welfare. Under certain conditions, the reforms that will reduce corruption will not be supported by either corrupt or honest politiciansProbabilistic voting, corruption, constitutional constraints, reform

Three-Candidate Competition when Candidates Have Valence: The Base Case

We study the Nash Equilibrium of three-candidate unidimensional spatial competition when candidates differ in their non-policy characteristics (valence). If the voters' policy preferences are represented by a strictly convex loss function, and if the voter density is unimodal and symmetric, then a unique, modulo symmetry, local Nash Equilibrium exists under fairly plausible conditions. The global Nash Equilibrium, however, exists when only one candidate has a valence advantage (or disadvantage) while the other two candidates have the same valenceMulti-candidate competition; valence; local Nash Equilibrium

On the (In)Effectiveness of Some Commonly Proposed Anti-Corruption Reforms

Using a theoretical model of two-candidate political competition under probabilistic voting, I study the effectiveness of the following anti-corruption reforms: (i) higher wages for politicians, (ii) higher penalties for political corruption, and (iii) constitutional constraints on the tax rates and the public good levels. In the setup I study, the competing candidates may differ in their popularity, (non-verifiable) ability, and corruptibility. I find that the reforms are more likely to be effective when the candidates are (almost) identical. When the candidates differ significantly from each other, each reform may increase equilibrium level of corruption or reduce voters' welfare.Anti-Corruption Reform; Political Corruption; Constitutional Constraints

Three-Candidate Competition When Candidates Have Valence: Stochastic Voting

We study the effects of stochastic (probabilistic) voting on equilibrium locations, equilibrium vote shares and comparative statics in a setup with three heterogenous candidates and a single-dimensional issue space. Comparing the equilibria with and without stochastic voting, we find that under an appropriate level of uncertainty about voter behavior, the model has a pure strategy Nash Equilibrium (PSNE) that is free from several non-plausible features of the PSNE under deterministic voting. The results are robust to extensions to asymmetric density and plurality maximization.Probabilistic voting; valence; three-candidate competition; centripetal incentives

Mackerels in the Moonlight: Corrupt Politicians and Anti- Corruption Reform in Two-Candidate Elections

This paper examines causes of the persistence of corruption among elected politicians and the effectiveness of some commonly discussed anti-corruption reforms. We study a theoretical model of competition between two candidates who differ both in ability and popularity in a probabilistic voting setup. Each candidate proposes a tax rate and a public good level. The elected candidate's ability determines the cost of producing the public good. The budget constraint implies that taxes collected must equal the sum of funds used in public good production plus funds stolen by the elected politician. We solve for the tax rate and public good level chosen by each candidate and how much each candidate decides to steal. We then identify conditions under which (i) imposing constitutional constraints such as tax rate (upper) or public good (lower) limits, (ii) increasing compensation of elected politicians, and (iii) small changes in legal penalties, will reduce corruption and increase voters' welfare. We find that the designers of a successful reform need to have information that is privately held by candidates. The redistributive effects of a reform and how that would affect the popularity of the reform is discussed as well. Finally, we argue that a welfare-improving reform that would reduce the corruption may not be supported by both corrupt and honest politicians.corruption, reform, constitutional limits

Political economy of anti-corruption reform in two-candidate elections

We analyze the effectiveness of some commonly discussed anti--corruption reforms on political corruption, using a theoretical model of competition between two candidates in a probabilistic voting setup. Candidates, who may differ both in their ability to produce the public good, and popularity with voters, propose a tax rate and a public good level. The budget constraint implies that taxes collected must equal the sum of funds used in public good production plus funds stolen by the elected politician. We identify the conditions under which constitutional constraints on policies, higher penalties for corruption, and higher wages for elected politicians increase (or decrease) voters' welfare. We discuss how the asymmetric information and the rigidity of constitutions reduce the effectiveness of the reforms, and how distributional effects of reforms may reduce the voters' support for a welfare--improving reform. Finally, we argue that effective reforms may not be proposed by both corrupt and honest politicians

Political economy of anti-corruption reform in two-candidate elections

We analyze the effectiveness of some commonly discussed anti--corruption reforms on political corruption, using a theoretical model of competition between two candidates in a probabilistic voting setup. Candidates, who may differ both in their ability to produce the public good, and popularity with voters, propose a tax rate and a public good level. The budget constraint implies that taxes collected must equal the sum of funds used in public good production plus funds stolen by the elected politician. We identify the conditions under which constitutional constraints on policies, higher penalties for corruption, and higher wages for elected politicians increase (or decrease) voters' welfare. We discuss how the asymmetric information and the rigidity of constitutions reduce the effectiveness of the reforms, and how distributional effects of reforms may reduce the voters' support for a welfare--improving reform. Finally, we argue that effective reforms may not be proposed by both corrupt and honest politicians