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Policy Dynamics and Inefficiency in a Parliamentary Democracy with Proportional Representation

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  • Baron, David P.

    (Stanford U)

  • Diermeier, Daniel

    (Northwestern U)

  • Fong, Pohan

    (Concordia U)

Abstract

This paper presents a dynamic model of election, government formation, and legislation in a parliamentary democracy with proportional representation in which the policy chosen in one period becomes the status quo for the next period. The electorate votes strategically by taking into account the likely governments that parties would form and the policies they would choose as a function of the status quo. The status quo also affects the bargaining power of the parties during government formation and their respective policy choices. A formateur party thus has incentives to strategically position the current policy to gain an advantage in both the next election and the subsequent government formation. These incentives can give rise to centrifugal forces that result in policies that are outside the Pareto set of the parties.

Suggested Citation

  • Baron, David P. & Diermeier, Daniel & Fong, Pohan, 2007. "Policy Dynamics and Inefficiency in a Parliamentary Democracy with Proportional Representation," Research Papers 1960, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:1960
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1960.pdf
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    Cited by:

    1. Marsiliani, Laura & Renström, Thomas I, 2007. "Political Institutions and Economic Growth," CEPR Discussion Papers 6143, C.E.P.R. Discussion Papers.
    2. Pohan Fong & Daniel Diermeier, 2007. "Policy Persistence in Multi-party Parliamentary Democracies," 2007 Meeting Papers 248, Society for Economic Dynamics.
    3. Francesco Giovannoni & Daniel Seidmann, 2014. "Corruption and power in democracies," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(3), pages 707-734, March.
    4. Laura Marsiliani & Thomas Renström, 2007. "Political institutions and economic growth," Economics of Governance, Springer, vol. 8(3), pages 233-261, May.

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