Efficiency, Welfare, and Political Competition

47 Pages Posted: 25 Jun 2014

See all articles by Felix J. Bierbrauer

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Pierre Boyer

Ecole Polytechnique, Palaiseau - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 23, 2014

Abstract

We study political competition in an environment in which voters have private information about their preferences. Our framework covers models of income taxation, public-goods provision or publicly provided private goods. Politicians are vote-share-maximizers. They can propose any policy that is resource-feasible and incentive-compatible. They can also offer special favors to subsets of the electorate. We prove two main results. First, in a symmetric equilibrium, policies are surplus-maximizing and hence first-best Pareto-efficient. Second, there is a surplus-maximizing policy that wins a majority against any welfare-maximizing policy. Thus, in our model, policies that trade off equity and efficiency considerations are politically infeasible.

Keywords: political competition, asymmetric information, public goods, non-linear income taxation, redistributive politics

JEL Classification: C720, D720, D820, H410

Suggested Citation

Bierbrauer, Felix J. and Boyer, Pierre C., Efficiency, Welfare, and Political Competition (May 23, 2014). CESifo Working Paper Series No. 4814. Available at SSRN: https://ssrn.com/abstract=2457861

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Pierre C. Boyer (Contact Author)

Ecole Polytechnique, Palaiseau - Department of Economics ( email )

Route de Saclay
Palaiseau, 91120
France

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

Poschinger Str. 5
Munich, DE-81679
Germany

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