We start by analyzing “presidential” regimes. Such regimes have two important institutional features. First, effective decision making power is split among different politicians, who are separately and directly accountable to the voters. This strengthen the “checks and balances” against political abuse and collusion among politicians. Second, the maintenance of such powers does not depend on a confidence vote, or more generally on majority support in the assembly. This, in turn, weakens the incentives to maintain stable coalitions in the assembly. Specifically, valuable proposal powers are not—like in the parliamentary regimes below—concentrated in a cabinet-style executive, which must rely on continued confidence of a majority in the legislature. Instead, the executive typically derives its mandate directly from the voters. The separation of powers may be between the president and Congress, or between different politicians in Congress other.
For example, the US fits both the aforementioned features; it has a directly elected president, and proposal powers over (economic) legislation are dispersed across powerful Congressional committees. As a result, legislative coalitions are rather unstable; we often observe different Congressional majorities forming over different policy issues, and relatively little party discipline. France, on the other hand, has neither of these features. Despite its popularly elected president, the proposal powers over (economic) legislation are concentrated in the cabinet, the survival of which depends on continued support from a majority in the National Assembly. For this reason, France is not classified as a Presidential, but a Parliamentary, democracy in the empirical analysis below.
We formulate a simple legislative bargaining game that seeks to capture these features. Different politicians, directly accountable to the voters, are assigned very sharp proposal powers over different policy dimensions. One of these, at, proposes the budget size. The other, ae, proposes the budget allocation among alternative uses. One may think of these two politicians as the ”tax committee” and the ’’expenditure committee”. A sequential “budget procedure” provides checks and balances and ensures effective separation of powers. Any majority can be formed to approve these proposals, and different majorities can be formed on each of the separate proposals. The specific timing is illustrated in Figure 3.
Three politicians, i = 1, 2, 3 share office at the start of the period. Two of them are exogenously chosen to act as at and ae. Having observed the role of their legislator, voters in all districts simultaneously formulate their reservation utilities, $*. Then at makes a “take it or leave it” proposal on the budget size, 3t. This proposal is voted upon by congress, namely by at, ae and the third politician.