The Voter's Blunt Tool

Abstract

When do voters win? In this paper we derive conditions under which a democracy will produce policies that favor the voter over special interests. We show that increasing political competition, increasing office holding benefits, decreasing potential rents to firms and increasing the salience of policy implies improved policies for the representative voter. We also find a positive interaction between the effect of political competition and office holding benefits. Panel data from the United States supports the model’s predictions. The ratio of taxes paid by individuals relative to corporations is decreasing with governor salary (a proxy for office holding benefits), protest activity (a proxy for policy salience), and political competition. Additionally, minimum wages are increasing with governor salary, protest activity, and political competition.

Keywords: Voting, Lobbying, Tax, Minimum Wage, Governor Salary, Protests, Political Competition

JEL Classification: D72, D78, H71, H76