Evidence on the Political Principal-Agent Problem from Voting on Public Finance for Concert Halls

38 Pages Posted: 9 Jul 2013

See all articles by Niklas Potrafke

Niklas Potrafke

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: June 30, 2013

Abstract

Principal-agent problems can arise when preferences of voters are not aligned with preferences of political representatives. Often the consequence of the political principal-agent problem is political catering to special interests. In this paper I provide examples of principal-agent problems regarding public spending. The examples concern construction or extension of concert halls in two German cities. Resistance to public funding for the concert halls was particularly strong in electoral districts with large constituencies on the left. The evidence indicates that political representatives were more bourgeois than their constituencies. In the cases studied asymmetric information did not prevail and voters were able to discipline their representatives through referenda that countered the results of voting by political representatives.

Keywords: principal-agent problem, referendum, direct democracy, political representation, political ideology, cultural policy

JEL Classification: D720, D780, H720, Z100

Suggested Citation

Potrafke, Niklas, Evidence on the Political Principal-Agent Problem from Voting on Public Finance for Concert Halls (June 30, 2013). CESifo Working Paper Series No. 4306, Available at SSRN: https://ssrn.com/abstract=2290946

Niklas Potrafke (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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