SCOPE OF GOVERNMENT: Post-election politics 5

What does the equilibrium look like? As bargaining power here is more equally shared among the coalition partners, the final allocation splits welfare more equally among voters in the majority coalition, as well as among their politicians. In particular, the equilibrium allocation of redistributive transfers and public goods must be jointly optimal for voters in the majority coalition. This generally leads to redistribution in favor of a majority, and the benefits of the public goods for the majority are internalized. That is, we have:
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which implies a higher r than in the Presidential system, since the right-hand side of (4.5) is larger than that of (4.3), while R and ° are the same.

We can summarize the central comparative politics results from our analysis of post-election politics. Compared to presidential regimes, parliamentary regimes have less competition among the voters. Redistributive transfers benefit a majority, rather than a minority. The supply of public goods is higher, as the politicians are induced to internalize the benefits for a larger coalition of voters. Parliamentary regimes also have less competition between the politicians who make policy proposals. The agency problem between voters and their representatives thus becomes more pronounced, as manifested in larger equilibrium rents. Altogether, a majority of voters and politicians benefit from higher taxes, so parliamentary regimes are associated with larger governments.

We close our theoretical analysis with a final remark. Despite the different assumptions, there is an important analogy between this comparative politics result and that obtained in the model of pre-election politics. Both in the pre-election politics and in the post-election model, political institutions determine the extent of competition among voters or politicians. More competition always brings about a lower supply of public goods as the benefits of fewer voters are internalized. In fact, the more competitive systems, namely the majoritarian electoral rule and the presidential regime, both imply that only a third of the voters’ preferences get internalized in the policy decisions. what is a payday loan

They therefore bring about exactly the same supply of public goods (satisfying Hg (g) = 1), even though the mechanisms leading to this outcome are different. In both cases, more competition also brings about smaller rents (as the agency problem is less harmful to the voters). This analogy suggests that from a normative point of view, political competition can be good or bad: it may be good for public good provision, but bad for the agency problem. Hence, a universally optimal constitutional form may not exist. Designers of constitutional reforms may face a tradeoff, and different societies may be better off with one or another institutional feature. This conclusion is consistent with the large varieties of political constitutions that we observe in the real world.

We exploit such observed variety in the next, empirical, section.