voting on majority rules political economy models usually take as given the rules which govern the political decision making with the simple majority rule being the most popular model in this paper we develop a simple yet powerful positive model where the majority rule governing future elections is itself chosen in an election we observe a large variety of majority rules governing elections in the real world on the one side referenda are usually decided by a simple majority at the other extreme many international organizations require unanimity in votes among the member states in the european union s council of ministers some proposals require only a simple majority some a supermajority of about 71 62 votes out of 87 and some require unanimous consent 1 explicit supermajorities 2 are required in most countries for a change of the constitution but in some u s states also for a tax raise even more important could be what we might call implicit supermajorities in parliamentary systems with a strong committee organization a legislative proposal usually needs the support of both the respective committee and the house in parliamentary systems with two chambers certain legislative proposals need the support of both chambers 3 previous rationalizations of qualified majority rules focus on the problem of condorcet cycles under simple majority rule in n dimensional elections and on commitment problems see our literature review below our model presents a new rationale for rules requiring qualified majorities in elections we analyse an overlapping generations model of voting on reform opportunities which we model as similar to investment projects at first there is a cost and then there are benefits since voters have a finite lifetime old voters will be less keen on reforms

separation of powers and political accountability political constitutions are incomplete contracts and therefore leave room for abuse of power in democracies elections are the primary mechanism for disciplining public officials but they are not sufficient separation of powers between executive and legislative bodies also helps to prevent the abuse of power but only with appropriate checks and balances checks and balances work by creating a conflict of interest between the executive and the legislature yet requiring both bodies to agree on public policy in this way the two bodies discipline each other to the voters advantage under appropriate checks and balances separation of powers also helps the voters elicit information

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

political selection and persistence of bad governments we study dynamic selection of governments under different political institutions with a special focus on institutional flexibility a government consists of a subset of the individuals in the society the competence level of the government in office determines collective utilities e g by determining the amount and quality of public goods and each individual derives additional utility from being part of the government e g rents from holding office we characterize the dynamic evolution of governments and determine the structure of stable governments which arise and persist in equilibrium in our model perfect democracy where current members of the government do not have veto power over changes in governments always leads to the emergence of the most competent government however any deviation from perfect democracy to any regime with incumbency veto power destroys this result there is always at least one other less competent government that is also stable and can persist forever and even the least competent government can persist forever in office we also show that there is a nonmonotonic relationship between the degree of incumbency veto power and the quality of government in contrast in the presence of stochastic shocks or changes in the environment a regime with less incumbency veto power has greater flexibility and greater probability that high competence governments will come to power this result suggests that a particular advantage of democratic regimes with a limited number of veto players may be their greater adaptability to changes rather than their performance under given conditions finally we show that royalty like dictatorships may be more successful than junta like dictatorships because in these regimes veto players are less afraid of change

voting for voters a model of electoral evolution we model the decision problems faced by the members of societies whose new members are determined by vote we adopt a number of simplifying assumptions the founders and the candidates are fixed the society operates for k periods and holds elections at the beginning of each period one vote is sufficient for admission and voters can support as many candidates as they wish voters assess the value of the streams of agents with whom they share the society while they belong to it in spite of these simplifications we show that interesting strategic behavior is implied by the dynamic structure of the problem the vote for friends may be postponed and it may be advantageous to vote for enemies we discuss the existence of different types of equilibria in pure strategies and point out interesting equilibria in mixed strategies

the control of politicians in divided societies the politics of fear autocrats in many developing countries have extracted enormous personal rents from power in addition they have imposed inefficient policies including pervasive patronage spending i present a model in which the presence of ethnic identities and the absence of institutionalized succession processes allow the ruler to elicit support from a sizeable share of the population despite large reductions in welfare the fear of falling under an equally inefficient and venal ruler that favours another group is enough to discipline supporters the model predicts extensive use of patronage ethnic bias in taxation and spending patterns and unveils a new mechanism through which economic frictions translate into increased rent extraction by the leader these predictions are consistent with the experiences of bad governance ethnic bias wasteful policies and kleptocracy in post colonial africa

choosing how to choose self stable majority rules and constitutions constitutional arrangements affect the decisions made by a society we study how this effect leads to preferences of citizens over constitutions and ultimately how this has a feedback that determines which constitutions can survive in a given society constitutions are stylized here to consist of a voting rule for ordinary business and possibly a different voting rule for making changes to the constitution we define an equilibrium notion for constitutions called self stability whereby under the rules of a self stable constitution the society would not vote to change the constitution we argue that only self stable constitutions will endure we prove that self stable constitutions always exist but that most constitutions even very prominent ones may not be self stable for some societies we show that constitutions where the voting rule used to amend the constitution is the same as the voting rule used for ordinary business are dangerously simplistic and there are many societies for which no such constitution is self stable we conclude with a characterization of the set of self stable constitutions that use majority rule for ordinary business

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

why did the incumbency advantage in u s house elections grow theory a simple rational entry argument suggests that the value of incumbency consists not just of a direct effect reflecting the value of resources such as staff attached to legislative office but also of an indirect effect reflecting the fact that stronger challengers are less likely to contest incumbent held seats the indirect effect is the product of a scare off effect the ability of incumbents to scare off high quality challengers and a quality effect reflecting how much electoral advantage a party accrues when it has an experienced rather than an inexperienced candidate hypothesis the growth of the overall incumbency advantage was driven principally by increases in the quality effect methods we use a simple two equation model estimated by ordinary least squares regression to analyze u s house election data from 1948 to 1990 results most of the increase in the incumbency advantage at least down to 1980 came through increases in the quality effect i e the advantage to the incumbent party of having a low quality challenger this suggests that the task for those wishing to explain the growth in the vote denominated incumbency advantage is to explain why the quality effect grew it also suggests that resource based explanations of the growth in the incumbency advantage cannot provide a full explanation

oligarchic versus democratic societies this paper develops a model to analyze economic performance under different political regimes an oligarchic society where political power is in the hands of major producers protects their property rights but also tends to erect significant entry barriers against new entrepreneurs democracy where political power is more widely diffused imposes redistributive taxes on producers but tends to avoid entry barriers when taxes in democracy are high and the distortions caused by entry barriers are low an oligarchic society achieves greater efficiency because comparative advantage in entrepreneurship shifts away from the incumbents the inefficiency created by entry barriers in oligarchy deteriorates over time the typical pattern is one of rise and decline of oligarchic societies an oligarchic society may first become richer but later fall behind a similar democratic society i also discuss how democracies may be better able to take advantage of new technologies how within elite conflict in oligarchies might cause a transition to democracy and how the unequal distribution of income may keep inefficient oligarchic institutions in place jel p16 o10

optimal retention in agency problems this paper studies the interaction between a single long lived principal and a series of short lived agents in the presence of both moral hazard and adverse selection we assume that the principal can influence the agents behavior only through her choice of a retention rule this rule is further required to be sequentially rational i e no precommitment is allowed we provide general conditions under which equilibria exist where a the principal adopts a cut off rule under which agents are retained only when the reward they generate exceeds a critical bound and b agents separate according to type with better agents taking superior actions we show that in equilibrium a retained agent s productivity is necessarily declining over time but that retained agents are also more productive on average than untried agents due to selection effects finally we show that for each given type agents of that type are more productive in the presence of adverse selection than when there is pure moral hazard i e when that type is the sole type of agent in the model nonetheless adding uncertainty about agent types cannot benefit the principal except in uninteresting cases

political careers or career politicians two main career paths are prevalent among politicians in modern democracies there are career politicians i e politicians who work in the political sector until retirement and political careers i e there are politicians who leave politics before retirement and work in the private sector in this paper we propose a dynamic equilibrium model of the careers of politicians in a political economy with a private sector and a political sector where individuals are heterogeneous with respect to their market ability as well as their political skills we characterize the conditions under which the two career paths emerge in equilibrium and establish a number of comparative statics results with respect to the quality of politicians and their careers

sources of inefficiency in a representative democracy a dynamic analysis this paper studies the efficiency of policy choice in representative democracies it extends the citizen candidate model of democratic policy making to a dynamic environment equilibrium policy choices are shown to be efficient in the sense that in each period conditional on future policies being selected through the democratic process there exists no alternative current policy choices which can raise the expected utilities of all citizens however policies that would be declared efficient by standard economic criteria are not necessarily adopted in political equilibrium the paper argues that these divergencies are legitimately viewed as politicalfailures

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

kleptocracy and divide and rule a model of personal rule many developing countries have suffered under the personal rule of kleptocrats who implement highly inefe cient economic policies expropriate the wealth of their citizens and use the proceeds for their own glorie cation or consumption we argue that the success of kleptocrats rests in part on their ability to use a divide and rule strategy made possible by the weakness of institutions in these societies members of society need to cooperate in order to depose a kleptocrat yet such cooperation may be defused by imposing punitive rates of taxation on any citizen who proposes such a move and redistributing the benee ts to those who need to agree to it thus the collective action problem can be intensie ed by threats which remain off the equilibrium path in equilibrium all are exploited and no one challenges the kleptocrat kleptocratic policies are more likely when foreign aid and rents from natural resources provide rulers with substantial resources to buy off opponents when opposition groups are shortsighted when the average productivity in the economy is low and when there is greater inequality between producer groups because more productive groups are more dife cult to buy off jel o12 h00

dynamics and stability of constitutions coalitions and clubs a central feature of dynamic collective decision making is that the rules that govern the procedures for future decision making and the distribution of political power across players are determined by current decisions for example current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations we develop a general framework for the analysis of this class of dynamic problems under relatively natural acyclicity assumptions we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness we show how this framework can be applied in political economy coalition formation and the analysis of the dynamics of clubs the explicit characterization we provide highlights two intuitive features of dynamic collective decision making 1 a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society 2 efficiency enhancing changes are often resisted because of further social changes that they will engender

globalization and the decline of the welfare state in less developed countries why have trends in government welfare spending in developing countries diverged from those in developed countries i address this question by investigating the effects of capital and trade flows on government welfare spending in fifty three developing countries using an original measure of labor power in developing countries i test the links between international markets labor s political strength and the welfare state i argue that labor s collective action problems caused by large populations of low skilled and surplus workers offset labor s potential political gains from globalization i show that when the proportion of low skilled workers in a nation is high globalization will lead to a decline in welfare spending most significantly the results suggest that in nations where labor market institutions are not yet well developed government social welfare spending is constrained by international market forces

order independent equilibria we study a noncooperative game of coalition formation based on an underlying game in coalitional form we introduce order independent equilibria oie a strategy profile is an oie if for any specification of first movers in the sequential game it remains an equilibrium and leads to the same payoff our results are 1 payoffs in oie that use pure stationary strategies must be in the core of the underlying game in coalitional form 2 if the underlying game has the property that all its subgames have nonempty cores then for each payoff vector there exists an oie with the same payoff journal of economic literature classification numbers c70 c71 c72 c78

a model of political competition with citizen candidates the authors develop a model of electoral competition in which citizens choose whether or not to run as candidates a winner implements her favorite policy the equilibrium number of candidates depends negatively on the cost of running and positively on the benefits of winning for some parameter values all equilibria under plurality rule have exactly two candidates whose positions are distinct two candidate elections are more likely under plurality rule than under a runoff system the candidates positions are less differentiated under a runoff system there exist equilibria under both systems in which some candidates have no chance of winning

seniority in legislatures we construct a stochastic game model of a legislature with an endogenously determined seniority system we model the behavior of the legislators as well as their constituents in an infinitely repeated divide the dollar game each legislative session must make a decision on redistributional issues modeled as a divide the dollar game however each session begins with a vote in which the legislators decide by majority rule whether or not to impose on themselves a seniority system legislative decisions on the redistributional issues are made by the baron ferejohn rule an agenda setter is selected by a random recognition rule which in our model is a function of the seniority system selected the agenda setter makes a proposal on redistributional issues and the legislature then votes whether to accept or reject the agenda setters proposal if the legislature rejects the proposal another agenda setter is randomly selected and the process is repeated if the legislature accepts the proposal the legislative session ends and the voters in each legislative district vote whether to retain their legislator or throw it out of office the voters verdict determines the seniority structure of the next period legislature we find a stationary equilibrium to the game having the property that the legislature imposes on itself a non trivial seniority system and that legislators are always reelected