Vote-Share Contracts and Democracy

Gersbach, Hans

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Vote-Share Contracts and Democracy

CEPR Discussion Paper No. DP6497

29 Pages Posted: 2 Jun 2008

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Research; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: September 2007

Abstract

In this paper we introduce vote-share contracts. Such contracts contain a vote-share threshold that incumbents must reach in order to be reelected. In a simple model, we illustrate the working of vote-share contracts. Such vote-share contracts curb socially detrimental incumbency advantages by improving the average ability level of re-elected politicians and also increase effort. We show that the socially optimal vote-share threshold for incumbents is larger than one half. Competing candidates offer vote-share contracts with socially optimal thresholds.

Keywords: elections, political contracts, vote-share thresholds

JEL Classification: D7, D82, H4

Suggested Citation: Suggested Citation

Gersbach, Hans, Vote-Share Contracts and Democracy (September 2007). CEPR Discussion Paper No. DP6497, Available at SSRN: https://ssrn.com/abstract=1138961