Economic effects of the capture of political parties

In a democracy, political parties perform the important role of aggregating the preferences of voters for policies, that is, parties observe the conflicting views of voters about the role of the government in the economy and aggregate these preferences into a policy that serves the parties’ electoral goals. This process of preference aggregation along with electoral competition might lead to desirable properties in the design of government spending. However, if candidates and parties do not share the same views about the role of the government in the economy, political parties could be captured by candidates who seek to impose their preferences over the parties’ views for policies. In this case, the role of preference aggregation of parties in a democracy is replaced by the personal agenda of candidates. In this article, we develop an analysis of economic consequences of the capture of political parties and identify four possible equilibriums with poor welfare properties. We show that the capture of political parties might lead to distortionary extreme policies with high (and in other instances low) spending in focalised and pure public goods.