Endogenous choice of electoral rules in a multi-party system with two dominant parties

We develop a model of endogenous choice of electoral rules in a multiparty system with two dominant parties, in an environment of uncertainty about the outcome of the election. Using quasi-lexicographic preferences over the number of seats necessary for a party to form a single-party government we explore the choice of the electoral law by the parties. We show that the minor parties never agree to an electoral reform that distorts the Proportional Representation system (PR). We also show that when the electoral competition among the two dominant parties is non-trivial there exists a unique and stable equilibrium: a unique new electoral rule is being adapted by the parliament in substitution of the PR rule. That is we show that when uncertainty about the outcome of the elections is present and if the dominant parties have a strong desire for single-party governments then strategic incentives to collude between them and distort the PR rule kick in. Hence, by colluding they also increase the probability that the winner will form a single-party government. The paper in e¤ect shows that under an uncertain political environment the two dominant parties have an incentive to collude in favour of stability (single-party governments) by eliminating the e¤ect of the third party in the formation of government. To conclude we also show that the equilibrium with the above characteristic is also unique. In an extension we use the timing of the electoral reform as a strategic variable

An Economic Model of Strategic Electoral Rule Choice Under Uncertainty

We study electoral rule choice in a multi-party model where parties are office-motivated and uncertainty over the electoral outcome is present. We show that when all dominant parties (parties with positive probability of winning the elections) have sufficiently good chances of winning, then they agree to change the PR with a more majoritarian rule. We identify the exact degree of disproportionality of the new rule and we prove that it is increasing in the expected vote share of the minority parties (parties with zero probability of winning). The necessary and sufficient conditions for such collusion in favour of a majoritarian rule are: a) the high rents from a single-party government, b) sufficient uncertainty over the electoral outcome and c) ideological proximity of the dominant parties. Keywords: electoral reform, majority premium, single-party government, uncertainty, collusion.

Does it Pay to Participate?

This paper analyzes whether participation in formal and informal community activities helped household in Indonesia mitigating the impact of the 1998 economic crisis. The paper uses the 1997 and 2000 round of Indonesian Family Life Survey (IFLS) to capture the impact of economic crisis on household welfare. The empirical results do not seem to support those hypotheses. Using number of children in each household as instrumental variable to solve the reverse causality and omitted variable bias problems, coefficient for community participation is not statistically significant in explaining changes in household expenditure. The large magnitude and universal nature of the shock might explain why social capital did not help households. However, using probit estimation with the same instrument, we find that participation in community activities increased the probability of households getting government assistance.Social capital, household welfare, economic crisis, participatory