Costs of Change, Political Polarization, and Re-Election Hurdles

75 Pages Posted: 10 Sep 2015

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)

Philippe Muller

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

Oriol Tejada

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

Date Written: August 2015

Abstract

We develop and study a two-period model of political competition with office- and policy-motivated candidates, in which (i) changes of policies impose costs on all individuals and (ii) such costs increase with the magnitude of the policy change. We show that there is an optimal positive level of costs of change that minimizes policy polarization and maximizes welfare. One interpretation of this finding is that societies with intermediate levels of conservatism achieve the highest welfare and the lowest polarization levels. We apply our model to the design of optimal re-election hurdles. In particular, we show that raising the vote-share needed for re-election above 50% weakly reduces policy polarization and tends to increase welfare. Furthermore, we identify circumstances where the optimal re-election hurdle is strictly larger than 50%.

Keywords: elections, democracy, political polarization, costs of change, re-election hurdles, political contracts

JEL Classification: D7, H4

Suggested Citation

Gersbach, Hans and Muller, Philippe and Tejada, Oriol, Costs of Change, Political Polarization, and Re-Election Hurdles (August 2015). Available at SSRN: https://ssrn.com/abstract=2658139 or http://dx.doi.org/10.2139/ssrn.2658139

Hans Gersbach (Contact Author)

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
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Germany

CESifo (Center for Economic Studies and Ifo Institute)

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Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Philippe Muller

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

Zürichbergstrasse 18
Zurich, 8092
Switzerland

HOME PAGE: http://www.mip.ethz.ch/people/person-detail.html?persid=122870

Oriol Tejada

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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