Coalition Preclusion Contracts and Moderate Policies

61 Pages Posted: 12 Sep 2016

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: September 2016

Abstract

We examine the effects of a novel political institution called Coalition Preclusion Contracts (CPCs) on the functioning of democracies with proportional representation. CPCs enable political parties to credibly exclude one or several parties from the range of coalitions they are prepared to envisage after elections. We consider a simple political game with a two-dimensional policy space in which three parties compete to form the government. We find that CPCs with a one-party exclusion rule defend the interests of the majority by precluding coalition governments that would include so-called extreme parties. This translates into moderation of the policies implemented and yields 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, elections, government formation., political contracts

JEL Classification: D72, D82, H55

Suggested Citation

Gersbach, Hans and Schneider, Maik T. and Tejada, Oriol, Coalition Preclusion Contracts and Moderate Policies (September 2016). CEPR Discussion Paper No. DP11492. Available at SSRN: https://ssrn.com/abstract=2837704

Hans Gersbach (Contact Author)

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

Zürichbergstrasse 18
Zurich, 8092
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+41 44 632 82 80 (Phone)
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IZA Institute of Labor Economics

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CESifo (Center for Economic Studies and Ifo Institute)

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Centre for Economic Policy Research (CEPR)

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Maik T. Schneider

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

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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