Electoral Competition and Political Rents

Abstract

We analyze the relation between the intensity of electoral competition and the dissipation of political rents. In a model with perfectly informed and heterogeneous voters, two candidates commit to electoral platforms under a majority voting and winner-takes-all rule. If the proposed tax revenues exceed the cost of the public good, the winning candidate retains the surplus (political rents). The candidates are uncertain about voters' preferences. If they do not know the mean of voters' distribution (aggregate uncertainty), competition is relaxed and rents are positive. We then consider some extensions, as ideological positioning, increasing the number of candidates and imperfect commitment to the announced policies.

JEL Classification: H1, H2, H4