Coalition-Preclusion Contracts and Moderate Policies

CER-ETH – Center of Economic Research at ETH Zurich Working Paper No. 14/195

61 Pages Posted: 29 Apr 2014

See all articles by Hans Gersbach

Hans Gersbach

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

Maik T. Schneider

University of Bath

Oriol Tejada

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Multiple version iconThere are 2 versions of this paper

Date Written: April 28, 2014

Abstract

We examine the effects of a novel political institution, which we call Coalition-Preclusion Contracts, on elections, policies, and welfare. Coalition-Preclusion Contracts enable political parties to credibly commit before the elections not to form a coalition after the elections with one or several other parties specified in the contract. We consider a political game in which three parties compete to form the government and study when contracts of the above type will be written. We find that in most circumstances Coalition-Preclusion Contracts with a single-party exclusion rule defend the interests of the majority by moderating the policies implemented. Moreover, they yield welfare gains for a large set of parameter values. We discuss the robustness of the results in more general settings and study how party-exclusion rules have to be adjusted when more than three parties compete in an election.

Keywords: coalition formation, political contracts, elections, government formation

JEL Classification: D72, D82, H55

Suggested Citation

Gersbach, Hans and Schneider, Maik T. and Tejada, Oriol, Coalition-Preclusion Contracts and Moderate Policies (April 28, 2014). CER-ETH – Center of Economic Research at ETH Zurich Working Paper No. 14/195. Available at SSRN: https://ssrn.com/abstract=2430264 or http://dx.doi.org/10.2139/ssrn.2430264

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Maik T. Schneider

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Oriol Tejada (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
41446329693 (Phone)

HOME PAGE: http://www.cer.ethz.ch/mip/people/toriol

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