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A dynamic theory of electoral competition

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  • Battaglini, Marco

    ()
    (Department of Economics, Princeton University)

Abstract

We present a dynamic theory of electoral competition to study the determinants of fiscal policy. In each period, two parties choose electoral platforms to maximize the expected number of elected representatives. The platforms include public expenditure, redistributive transfers, the tax rate and the level of public debt. Voters cast their vote after seeing the platforms and elect representatives according to a majoritarian winner take all system. The level of debt, by affecting the budget constraint in future periods, creates a strategic linkage between electoral cycles. We characterize the Markov equilibrium of this game when public debt is the state variable, and study how Pareto efficiency depends on the electoral rule and the underlying fundamentals of the economy.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 9 (2014)
Issue (Month): 2 (May)
Pages:

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Handle: RePEc:the:publsh:1328

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Keywords: Political economy; electoral systems;

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References

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  1. Stephen Coate & Marco Battaglini, 2007. "A Dynamic Theory of Public Spending, Taxation and Debt," 2007 Meeting Papers 573, Society for Economic Dynamics.
  2. Daron Acemoglu & Michael Golosov & Aleh Tsyvinski, 2007. "Political Economy of Mechanisms," Working Papers CAS_RN_2007_2, Laboratory for Macroeconomic Analysis.
  3. John Duggan & Tasos Kalandrakis, 2007. "Dynamic Legislative Policy Making," Wallis Working Papers WP45, University of Rochester - Wallis Institute of Political Economy.
  4. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  5. Kalandrakis, Anastassios, 2004. "A three-player dynamic majoritarian bargaining game," Journal of Economic Theory, Elsevier, vol. 116(2), pages 294-322, June.
  6. Battaglini, Marco & Nunnari, Salvatore & Palfrey, Thomas, 2011. "Legislative bargaining and the dynamics of public investment," Discussion Papers, Research Unit: Market Behavior SP II 2011-205, Social Science Research Center Berlin (WZB).
  7. Marco Battaglini & Salvatore Nunnari & Thomas R. Palfrey, 2010. "Political Institutions and the Dynamics of Public Investment," Carlo Alberto Notebooks 142, Collegio Carlo Alberto.
  8. Coughlin, Peter & Nitzan, Shmuel, 1981. "Electoral outcomes with probabilistic voting and Nash social welfare maxima," Journal of Public Economics, Elsevier, vol. 15(1), pages 113-121, February.
  9. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
  10. marina, azzimonti, 2009. "Barriers to investment in polarized societies," MPRA Paper 25936, University Library of Munich, Germany.
  11. Roger Lagunoff & Jinhui Bai, 2008. "On the ``Faustian Dynamics" of Policy and Political Power," 2008 Meeting Papers 456, Society for Economic Dynamics.
  12. Bard Harstad, 2012. "Climate Contracts: A Game of Emissions, Investments, Negotiations, and Renegotiations," Review of Economic Studies, Oxford University Press, vol. 79(4), pages 1527-1557.
  13. Pierre Yared, 2010. "Politicians, Taxes and Debt," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 806-840.
  14. David Austen-Smith, 2000. "Redistributing Income under Proportional Representation," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1235-1269, December.
  15. Marco Battaglini & Salvatore Nunnari & Thomas Palfrey, 2012. "The Free Rider Problem: a Dynamic Analysis," NBER Working Papers 17926, National Bureau of Economic Research, Inc.
  16. Ruediger Bachmann & Jinhui Bai, 2010. "Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality," NBER Working Papers 16247, National Bureau of Economic Research, Inc.
  17. Jinhui H. Bai & Ruediger Bachmann, 2010. "Government Purchases Over the Business Cycle: the Role of Heterogeneity and Wealth Bias in Political Decision Making," 2010 Meeting Papers 621, Society for Economic Dynamics.
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Cited by:
  1. Alexandre B. Cunha & Emanuel Ornelas, 2014. "Political Competition and the Limits of Political Compromise," CESifo Working Paper Series 4737, CESifo Group Munich.
  2. Jean Guillaume Forand & John Duggan, 2013. "Markovian Elections," Working Papers 1305, University of Waterloo, Department of Economics, revised Oct 2013.

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