Designing Democracies for Sustainability

29 Pages Posted: 9 Nov 2004

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)

Tobias Kleinschmidt

Heidelberg University - Faculty of Economics and Social Studies

Date Written: September 2004

Abstract

Democratic processes may not take the welfare of future generations sufficiently into account and thus may not achieve sustainability. We show that the dual democratic mechanism - rejection/support rewards (RSRs) for politicians and elections - can achieve sustainability. RSRs stipulate that incumbents who are not re-elected, but obtain the majority support among young voters receive a particular monetary or non-monetary reward. Such rejection/support rewards induce politicians to undertake long-term beneficial policies, but may invite excessive reward-seeking. We identify optimal RSRs under different informational circumstances.

Keywords: Democracy, elections, incentive contracts, sustainability, rejection/support rewards

JEL Classification: D72, D82, H55, Q56

Suggested Citation

Gersbach, Hans and Kleinschmidt, Tobias, Designing Democracies for Sustainability (September 2004). CEPR Discussion Paper No. 4623. Available at SSRN: https://ssrn.com/abstract=617307

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
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

Tobias Kleinschmidt

Heidelberg University - Faculty of Economics and Social Studies ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

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