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Vote-Share Contracts and Learning-by-Doing

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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File URL: http://www.cer.ethz.ch/research/WP-09-114.pdf
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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
Date of revision:
Handle: RePEc:eth:wpswif:09-114
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  1. Daniel Diermeier & Michael Keane & Antonio Merlo, 2002. "A Political Economy Model of Congressional Careers," PIER Working Paper Archive 04-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2004.
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  22. repec:cup:cbooks:9780521417815 is not listed on IDEAS
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