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Electoral Control in the Presence of Moral Hazard and Adverse Selection

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  • Umeno, Luis Gustavo
  • Bugarin, Maurício Soares

Abstract

This article studies a two-period game between voters and an elected incumbent where voters care both about controlling incumbent corruption and selecting competent incumbents. If voters’ reelection criterion is very demanding, only very competent incumbents will be reelected but corruption will be significant. Conversely, if voters use a softer reelection criterion, corruption may be more controlled but too many incompetent incumbents will be reelected. A trade-off arises in equilibrium between the incentive and the selection motives. The model is extended to include society’s risk aversion and shows that the more risk averse, the softer the voters’ reelection criterion.

Suggested Citation

  • Umeno, Luis Gustavo & Bugarin, Maurício Soares, 2008. "Electoral Control in the Presence of Moral Hazard and Adverse Selection," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 28(1), May.
  • Handle: RePEc:sbe:breart:v:28:y:2008:i:1:a:1516
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    References listed on IDEAS

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    1. Baron, David P. & Ferejohn, John A., 1989. "Bargaining in Legislatures," American Political Science Review, Cambridge University Press, vol. 83(4), pages 1181-1206, December.
    2. Alesina, Alberto & Rosenthal, Howard, 1996. "A Theory of Divided Government," Econometrica, Econometric Society, vol. 64(6), pages 1311-1341, November.
    3. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    4. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    5. Bugarin, Mauricio Soares, 1999. "Vote Splitting as Insurance against Uncertainty," Public Choice, Springer, vol. 98(1-2), pages 153-169, January.
    6. Alesina, Alberto & Rosenthal, Howard, 1989. "Partisan Cycles in Congressional Elections and the Macroeconomy," American Political Science Review, Cambridge University Press, vol. 83(2), pages 373-398, June.
    7. Rosenthal, Howard & Alesina, Alberto, 1989. "Partisan Cycles in Congressional Elections and the Macroeconomy," Scholarly Articles 4553031, Harvard University Department of Economics.
    8. repec:hrv:faseco:34222831 is not listed on IDEAS
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    Cited by:

    1. Jorge Streb & Gustavo Torrens, 2013. "Making rules credible: divided government and political budget cycles," Public Choice, Springer, vol. 156(3), pages 703-722, September.

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