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Vote-Share Contracts and Learning-by-Doing

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    Abstract

    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.

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    Bibliographic Info

    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 09/114.

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    Length: 44 pages
    Date of creation: Jul 2009
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    Handle: RePEc:eth:wpswif:09-114

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    Keywords: elections; political contracts; vote-share thresholds; learning-by-doing effects; incumbency advantage;

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