Political Parties and Network Formation
Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE)
University of Helsinki - Department of Economics; Helsinki Center of Economic Research (HECER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 1918
CESifo Working Paper Series No. 1663
We argue that anti-corruption laws may provide an efficiency rationale for why political parties should meddle in the distribution of political nominations and government contracts. Anti-corruption laws forbid trade in spoils that politicians distribute. However, citizens may pay for gaining access to politicians and, thereby, to become potential candidates for nominations. Such rent-seeking results in excessive network formation. Political parties may reduce wasteful network formation, thanks to their ability to enter into exclusive membership contracts. This holds even though anti-corruption laws also bind political parties.
Number of Pages in PDF File: 31
Keywords: political parties, two-sided platforms, rent-seeking, network formation
JEL Classification: D72, D85, L14working papers series
Date posted: January 25, 2006
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