Competition of Politicians for Incentive Contracts and Elections

Gersbach, Hans

doi:10.1007/s11127-004-0555-z

Cited by 38 publications

(24 citation statements)

References 27 publications

(17 reference statements)

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“…There is some recent literature on political contracts (see e.g. Gersbach (2004a), Gersbach (2005), Gersbach and Müller (2006), and Gersbach and Liessem (2008)). Note that vote-share contracts feature one great advantage, compared to other types of political 3 contracts: They allow to tackle multi-task problems as success or failure of the incumbent depends not only on the tasks recorded in contract, but on overall performance which is crucial for reaching the vote-share threshold.…”

Section: Related Literaturementioning

confidence: 99%

Vote-Share Contracts and Learning-by-Doing

Müller

2009

SSRN Journal

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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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Section: Related Literaturementioning

confidence: 99%

Vote-Share Contracts and Learning-by-Doing

Müller

2009

SSRN Journal

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“…Contractual imperfections that prevent current majorities from writing contracts with future ones can be an additional source of under-investment in public goods in a representative democracy (Leblanc et al, 2000). Gersbach (2004) shows in a study related to our's that voters cannot motivate politicians with a low discount rate to invest in longterm public projects and argues that incentive contracts can eliminate this problem. In our analysis, voters and politicians have the same discount rate, and we show how myopia is generated by the interaction between economic and political factors.…”

Section: Introductionmentioning

confidence: 99%

Policy myopia and economic growth

Aidt

Dutta

2007

European Journal of Political Economy

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We develop a theory of second best policy myopia. Policy myopia arises when rational voters allow politicians to bias public investments towards short-term investments. We demonstrate that policy myopia is not an inevitable implication of the fact that voters cannot observe immediately how much their politicians invest in certain types of public goods; rather it is the interaction between observation lags, economic growth and binding revenue constraints that forces rational voters to accept a short-term bias. We argue that growth in government and policy myopia are related social phenomena. The analysis is motivated by stylized facts about public spending patterns.Keywords: Myopia; growth; public goods; electoral accountability. JEL Classi…cation: D72; D82.We would like to thank the ESRC for research support under the "Understanding the Evolving Macroeconomy" research program (grant no. L138251006). We have bene…ted from comments from Stephen Morris, Nicola Persico, Roger Backhouse, Vania Sena, Laura Marsiliani, John Hardman Moore, Timothy Guinnane, Jozsef Sakovics, and numerous seminar participants. We also thank Karlygash Kuralbayeva for research assistance and Elena Loukoianova for assistance with related research. Policy Myopia and Economic Growth AbstractWe develop a theory of second best policy myopia. Policy myopia arises when rational voters allow politicians to bias public investments towards short-term investments. We demonstrate that policy myopia is not an inevitable implication of the fact that voters cannot observe immediately how much their politicians invest in certain types of public goods; rather it is the interaction between observation lags, economic growth and binding revenue constraints that forces rational voters to accept a short-term bias. We argue that growth in government and policy myopia are related social phenomena. The analysis is motivated by stylized facts about public spending patterns.

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“…The theoretical analysis of incentive elements in politics has been initiated by Gersbach (2003) and extended by Liessem (2001, 2003), and Gersbach (2004a). A comprehensive summary of the ideas, chances and problems of incentive contracts for politicians can be found in Gersbach (2005).…”

Section: Introductionmentioning

confidence: 99%