, Volume 49, Issue 3, pp 703-738

A dynamic theory of parliamentary democracy

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Abstract

This paper presents a dynamic model of elections, government formation, and legislation in a parliamentary democracy with proportional representation in which the policy chosen in one period becomes the status quo for the next period. The electorate votes strategically by taking into account the likely governments that parties would form based on their representation and the policies they would choose as a function of the status quo. The status quo thus affects both the election outcomes and the bargaining power of the parties during government formation. A formateur party therefore has incentives to strategically position the current policy to gain an advantage in both the next election and the subsequent bargaining over government formation and policy choice. These incentives can give rise to centrifugal forces that result in policies that are outside the Pareto set of the parties.

Formerly “Policy Dynamics and Inefficiency in a Parliamentary Democracy with Proportional Representation.” Diermeier gratefully acknowledges financial support from the Canadian Institute for Advanced Research (CIFAR). We thank Steve Coate and seminar participants at the meeting of the CIFAR Institutions, Organizations, and Growth group, the NBER Summer Institute, the North American Winter Meeting of the Econometrics Society, Princeton University and Washington University in St. Louis for comments and suggestions.