Candidate entry, screening, and the political budget cycle
Le Borgne , Eric and Lockwood, Ben (2001) Candidate entry, screening, and the political budget cycle. Working Paper. University of Warwick, Department of Economics, Coventry.
WRAP_Le_Borgne_twerp582.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
We investigate whether relevant private information about citizens’ competence in political office can be credibly revealed by their entry and campaign expenditure decisions, as opposed to choice of policy once in office. We find that this depends on whether voters and candidates have common or conflicting interests; only in the former case can entry be revealing in equilibrium. We apply these results to Rogoff’s (1990) model of the political budget cycle, allowing for candidate entry, as well as elections: as interests are common, low-ability candidates are screened out at the entry stage, and so there is no signaling via fiscal policy (i.e. no “political budget cycle”). In a variant of the Rogoff. model where citizens differ in honesty, rather than ability, interests are conflicting, and so the political budget cycle can persist in equilibrium.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HC Economic History and Conditions
J Political Science > JA Political science (General)
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Political campaigns, Campaign funds, Information asymmetry, Representative government and representation|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Number of Pages:||41|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Description:||Original version, June 2000; revised August 2001|
|References:||Austen-Smith, D. (1987), “Interest Groups, Campaign Contributions, and Probabilistic Voting”, Public Choice, 54, 123-39. Austen-Smith, D. and J. Banks (1989), “Electoral Accountability and Incumbency”, in Models of Strategic Choice in Politics, (P. Ordershook, Ed.) University of Michigan Press, Ann Arbor. Banks, J.S. and R.K. Sundaram (1998), “Optimal Retention in Agency Problems”, Journal of Economic Theory, 82, 293-323. Banks, J.S. and R.K. Sundaram (1993), “Adverse Selection and Moral hazard in a Repeated Elections Model”, in Political Economy: Institutions, Information Competition, and Representation, (W. Barnett, et al., Eds.), Cambridge University Press, Cambridge UK. Barro, R.J. (1973), “The Control of Politicians: an Economic Model”, Public Choice, 14, 19-42. Barro, R.J. (1986), “Reputation in a Model of Monetary Policy with Incomplete Information”, Journal of Monetary Economy, 17, 3-20. Bartolini, L. and A. Drazen (1997), “Capital Account Liberalization as a Signal”, American Economic Review, 87, 138-54. Besley, T. and A. Case (1995), “Does Electoral Accountability Affect Economic Policy Choices? Evidence From Gubernatorial Term Limits ”, Quarterly Journal of Economics, 110, 769-98. Besley, T. and S. Coate (1998), “Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis”, American Economic Review, 88, 139-56. Besley, T. and S. Coate (1997), “An Economic Model of Representative Democracy ”, Quarterly Journal of Economics, 112, 85-114. Besley, T. and M. Smart (2001), “Does Tax Competition Raise Voter Welfare?”, mimeo London School of Economics. Bowles, N. (1998), Government and Politics Of The United States, (second edition) Macmillan Press, London. Cho, I-K. and D. Kreps (1987), “Signaling games and Stable Equilibria”, Quarterly Journal of Economics, 102, 179-221. Coate, S., and S. Morris (1995), “On the Form of Transfers to Special Interests”, Journal of Political Economy, 103, 1210-35. Cukierman, A. and N. Liviatan (1991), “Optimal Accommodation by Strong Policymakers Under Incomplete Information”, Journal of Monetary Economics, 27, 99-127. Cukierman, A. and A.H. Meltzer (1986), “A Theory of Ambiguity, Credibility, and Inflation Under Discretion and Asymmetric Information”, Econometrica, 54, 1099-1128. Cukierman, A. and M. Tommasi (1998), “When Does It Take a Nixon to Go to China?”, American Economic Review, 88, 180-97. Dhillon, A. and B. Lockwood (2000), “When are Plurality Rule Voting Games Dominance Solvable?”, mimeo University of Warwick. Drazen, A. (2000a), Political Economy in Macroeconomics, Princeton University Press, Princeton, NJ. Drazen, A. (2000b), “The Political Business Cycle After 25 Years”. Forthcoming in: Bernanke, B., K. Rogoff (Eds.), NBER Macroeconomics Annual 2000. NBER,Cambridge, MA. Ferejohn, J. (1986), “Incumbent Performance and Electoral Control” Public Choice, 50, 5-26. Harrington, J.E., Jr. (1993), “Economic Policy, Economic Performance, and Elections”, American Economic Review, 83, 27-42. Hess, G. and A. Orphanides (1995), “War Politics: An Economic, Rational Voter Framework”, American Economic Review, 85, 828-46. Maidment, R. and A. McGrew (1991) The American Political Process, Sage Publications, London. Milyo, J. and T. Groseclose (1999), “The Electoral Effects of IncumbentWealth”, Journal of Law and Economics, 42, 699-722. Osborne, M.J. and A. Slivinski (1996), “A Model of Political Competition with Citizen Candidates”, Quarterly Journal of Economics, 111, 65-96. Persson, T. and G. Tabellini (2000), Political Economics: Explaining Economic Policy, MIT Press, Cambridge, MA. Prat, A. (2000), “Campaign Spending With Office-Seeking Politicians, Rational Voters, and Multiple Lobbies”, mimeo, London School of Economics. Prat, A. (1997), “Campaign Advertising and Voter Welfare”, mimeo, London School of Economics. Rogoff, K. (1987), “Reputational Constraints on Monetary Policy”, Carnegie-Rochester Conference Series in Public Policy, 26, 141-81. Rogoff, K. (1990), “Equilibrium Political Budget Cycles”, American Economic Review, 80, 21-36. Rogoff, K. and A. Sibert (1988), “Elections and Macroeconomic Policy Cycles”, Review of Economic Studies, 55, 1-16. Salmore S.A., and B.G. Salmore (1985) Candidates, Parties, and Campaigns: Electoral Politics in America, Congressional Quarterly Press, Washington D.C. Shi, M. and J. Svensson (2001), “Conditional Political Budget Cycles”, mimeo Harvard University and IIES. Vickers, J. (1986), “Signalling in a Model of Monetary Policy with Incomplete Information”, Oxford Economic Papers, 38, 443-55. Wittman, D. (1989), “Why Democracies Produce Efficient Results”, Journal of Political Economy, 97, 1395-426.|
Actions (login required)