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Reelection Threshold Contracts in Politics

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  • Hans Gersbach
  • Verena Liessem

Abstract

When politicians are provided with insufficient incentives by the democratic election mechanism, we show that social welfare can be improved by threshold contracts. A threshold incentive contract stipulates a performance level which a politican must reach in order to have the right to stand for reelection. Read my lips would turn into read my contracts. Reelection thresholds can be offered by politicians during campaigns and do not impair the liberal principle of free and anonymous elections in democracies.

Suggested Citation

  • Hans Gersbach & Verena Liessem, 2001. "Reelection Threshold Contracts in Politics," CESifo Working Paper Series 622, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_622
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    References listed on IDEAS

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    1. Lockwood, Ben, 1997. "State-Contingent Inflation Contracts and Unemployment Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 286-299, August.
    2. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1163-1202.
    3. Svensson, Lars E O, 1997. "Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts," American Economic Review, American Economic Association, vol. 87(1), pages 98-114, March.
    4. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1998. "Optimal Retention in Agency Problems," Journal of Economic Theory, Elsevier, vol. 82(2), pages 293-323, October.
    5. Gersbach, Hans, 2007. "Vote-share Contracts and Democracy," CEPR Discussion Papers 6497, C.E.P.R. Discussion Papers.
    6. Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
    7. 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.
    8. Gersbach, Hans & Schneider, Maik T., 2012. "Tax contracts and elections," European Economic Review, Elsevier, vol. 56(7), pages 1461-1479.
    9. Gersbach, Hans & Liessem, Verena, 2008. "Incentive contracts and elections for politicians with multi-task problems," Journal of Economic Behavior & Organization, Elsevier, vol. 68(2), pages 401-411, November.
    10. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    11. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
    12. Jensen, Henrik, 1997. "Credibility of Optimal Monetary Delegation," American Economic Review, American Economic Association, vol. 87(5), pages 911-920, December.
    13. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    14. Hahn, Volker, 2009. "Reciprocity and voting," Games and Economic Behavior, Elsevier, vol. 67(2), pages 467-480, November.
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    Citations

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    Cited by:

    1. Markus Müller, 2007. "Motivation of politicians and long-term policies," Public Choice, Springer, vol. 132(3), pages 273-289, September.
    2. Panu Poutvaara & Tuomas Takalo, 2007. "Candidate quality," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 7-27, February.
    3. Hans Gersbach, 2007. "Anreize für Weitsicht und Wiederwahlschwellen: Wege zur besseren Demokratie," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(4), pages 389-397, November.
    4. Hans Gersbach & Markus Müller, 2011. "Information Markets, Elections and Contracts," CESifo Working Paper Series 3327, CESifo Group Munich.
    5. Johannes Gerd Becker & Hans Gersbach, 2013. "A Theory of Threshold Contracts," CER-ETH Economics working paper series 13/182, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    6. Bugarin, Mauricio S., 2009. "Vote Splitting, Reelection and Electoral Control: Political Gridlocks, Ideology and the War on Terror," Insper Working Papers wpe_199, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    7. Verena Liessem, 2008. "Electoral competition, incentive contracts for politicians and unknown preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(1), pages 13-41, January.
    8. Hans Gersbach, 2014. "Government Debt-Threshold Contracts," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 444-458, January.
    9. Markus Müller, 2009. "Vote-Share Contracts and Learning-by-Doing," CER-ETH Economics working paper series 09/114, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    10. 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.

    More about this item

    Keywords

    elections; incentive contracts; democracy;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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