The Political Economy of Clientelism

Income redistribution often takes highly inefficient forms, such as employment in the bureaucracy. We argue that this arises as an optimal political strategy in situations where politicians cannot commit to policies. Political exchanges between politicians and voters must be self-enforcing and some types of policies, particularly those generating non-excludable or irreversible benefits (such as public goods and public investment) do not generate incentives. A job is a credible, excludable and reversible method of redistribution that ties the continuation utility of a voter to the political success of a particular politician. It is thus very attractive politically even if it is socially highly inefficient. Our model provides a formalization of a style of redistributive politics known as ?clientelism?. We show that inefficient redistribution and clientelism becomes a relatively attractive political strategy in situations with high inequality and low productivity. Inefficiency is increased when (1) the ?stakes? from politics are high, (2) inequality is high, and (3) when money matters less than ideology in politics.