Abstract

http://ssrn.com/abstract=969415
 
 

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Policy Dynamics and Inefficiency in a Parliamentary Democracy with Proportional Representation


David P. Baron


Stanford University - Graduate School of Business

Daniel Diermeier


Northwestern University - Kellogg School of Management

Pohan Fong


University of Rochester - Department of Economics

February 2007

Stanford University Graduate School of Business Research Paper No. 1960

Abstract:     
This paper presents a dynamic model of election, government formation, and legislation in a parliamentary democracy with proportional representation in which the policy chosen in one period becomes the status quo for the next period. The electorate votes strategically by taking into account the likely governments that parties would form and the policies they would choose as a function of the status quo. The status quo also affects the bargaining power of the parties during government formation and their respective policy choices. A formateur party thus has incentives to strategically position the current policy to gain an advantage in both the next election and the subsequent government formation. These incentives can give rise to centrifugal forces that result in policies that are outside the Pareto set of the parties.

Number of Pages in PDF File: 51

Keywords: political economy

JEL Classification: D70, H50

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Date posted: March 26, 2007  

Suggested Citation

Baron, David P. and Diermeier, Daniel and Fong, Pohan, Policy Dynamics and Inefficiency in a Parliamentary Democracy with Proportional Representation (February 2007). Stanford University Graduate School of Business Research Paper No. 1960. Available at SSRN: http://ssrn.com/abstract=969415 or http://dx.doi.org/10.2139/ssrn.969415

Contact Information

David P. Baron (Contact Author)
Stanford University - Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
650-723-3757 (Phone)
650-725-6152 (Fax)

Daniel Diermeier
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
Pohan Fong
University of Rochester - Department of Economics ( email )
Harkness Hall
Rochester, NY 14627
United States
(585) 242-0398 (Phone)
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