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Elections, Contracts and Markets

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Author Info
Hans Gersbach () (Center of Economic Research (CER-ETH), ETH Zurich)
Markus Müller () (Center of Economic Research (CER-ETH), ETH Zurich)

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Abstract

As the performance of long-term projects is not observable in the short run politicians may pander to public opinion. To solve this problem, we propose a triple mechanism involving political information markets, reelection threshold contracts, and democratic elections. An information market is used to predict the long-term performance of a policy, while threshold contracts stipulate a price level on the political information market that a politician must reach to have the right to stand for reelection. Reelection thresholds are offered by politicians during campaigns. We show that, on balance, the triple mechanism increases social welfare.

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 06/56.

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Length: 46 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:eth:wpswif:06-56

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Related research
Keywords: elections; threshold contracts; democracy; information markets; triple mechanism;

Other versions of this item:

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  6. Moritz Schularick & Thomas Steger, 2006. "Does Financial Integration Spur Economic Growth? New Evidence from the First Era of Financial Globalization," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  8. Corrado Di Maria & Simone Valente, 2006. "The Direction of Technical Change in Capital-Resource Economies," CER-ETH Economics working paper series 06/50, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  12. Karen Pittel & Amigues Jean-Pierre & Thomas Kuhn, 2005. "Endogenous growth and recycling : a material balance approach," CER-ETH Economics working paper series 05/37, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  13. Gersbach, Hans & Muller, Markus, 2006. "Elections, Contracts and Markets," CEPR Discussion Papers 5717, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  14. Thomas M. Steger, 2003. "Economic Growth and Sectoral Change under Resource Reallocation Costs," CER-ETH Economics working paper series 03/30, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  17. Valente Simone, 2005. "Intergenerational Transfers, Lifetime Welfare and Resource Preservation," Departmental Working Papers 214, Tor Vergata University, CEIS. [Downloadable!]
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  19. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2007. "The bigger the better? Evidence of the effect of government size on life satisfaction around the world," Public Choice, Springer, vol. 130(3), pages 267-292, March. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ulrich Brandt-Pollmann & Ralph Winkler & Sebastian Sager & Ulf Moslener & Johannes P. Schlöder, 2006. "Numerical solution of optimal control problems with constant control delays," CER-ETH Economics working paper series 06/59, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  2. Theresa Fahrenberger & Hans Gersbach, 2007. "Minority Voting and Long-term Decisions," CER-ETH Economics working paper series 07/70, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  3. Hans Gersbach & Volker Hahn, 2008. "Forward Guidance for Monetary Policy: Is It Desirable?," CER-ETH Economics working paper series 08/84, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  4. Simone Valente, 2007. "International Status Seeking, Trade, and Growth Leadership," CER-ETH Economics working paper series 07/75, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  5. Gersbach, Hans, 2007. "Vote-share Contracts and Democracy," CEPR Discussion Papers 6497, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," CER-ETH Economics working paper series 08/89, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  7. Simone Valente, 2007. "Human Capital, Resource Constraints and Intergenerational Fairness," CER-ETH Economics working paper series 07/68, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  8. Urs von Arx & Andreas Schäfer, 2007. "The Influence of Pension Funds on Corporate Governance," CER-ETH Economics working paper series 07/63, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  9. Christoph Heinzel & Ralph Winkler, 2007. "The role of environmental and technology policies in the transition to a low-carbon energy industry," CER-ETH Economics working paper series 07/71, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  10. Hans Gersbach & Ralph Winkler, 2007. "On the Design of Global Refunding and Climate Change," CER-ETH Economics working paper series 07/69, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jul 2007. [Downloadable!]
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  11. Damian S. Damianov & Johannes Gerd Becker, 2008. "Auctions with Variable Supply: Uniform Price versus Discriminatory," CER-ETH Economics working paper series 08/80, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  12. Ian A. MacKenzie,, 2008. "On the Sequential Choice of Tradable Permit Allocations," CER-ETH Economics working paper series 08/83, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  13. Hans Gersbach & Markus Müller, 2006. "Elections, Contracts and Markets," CER-ETH Economics working paper series 06/56, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  14. Volker Hahn, 2007. "Information Acquisition by Price-Setters and Monetary Policy," CER-ETH Economics working paper series 07/73, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  15. Hans Gersbach & Maik T. Schneider & Olivier Schneller, 2008. "On the Design of Basic-Research Policy," CER-ETH Economics working paper series 08/79, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  16. Theresa Fahrenberger & Hans Gersbach, 2007. "Legislative Process with Open Rules," CER-ETH Economics working paper series 07/64, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  17. Hans Gersbach & Verena Liessem, 2008. "Reelection threshold contracts in politics," Social Choice and Welfare, Springer, vol. 31(2), pages 233-255, August. [Downloadable!] (restricted)
    Other versions:
  18. Ralph Winkler, 2006. "Now or Never: Environmental Protection under Hyperbolic Discounting," CER-ETH Economics working paper series 06/60, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  19. Hans Gersbach, 2007. "The Global Refunding System and Climate Change," CER-ETH Economics working paper series 07/62, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  20. Maik T. Schneider, 2007. "Knowledge Codification and Endogenous Growth," CER-ETH Economics working paper series 07/65, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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