Economic Theory

, Volume 49, Issue 3, pp 703–738

A dynamic theory of parliamentary democracy

Authors

  • David P. Baron
    • Graduate School of BusinessStanford University
    • Department of Managerial Economics and Decision Sciences (MEDS) and Ford Motor Company Center for Global Citizenship, Kellogg School of ManagementNorthwestern University
  • Pohan Fong
    • Department of Economics and FinanceCity University of Hong Kong
Symposium

DOI: 10.1007/s00199-011-0625-7

Cite this article as:
Baron, D.P., Diermeier, D. & Fong, P. Econ Theory (2012) 49: 703. doi:10.1007/s00199-011-0625-7

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.

Keywords

Parliamentary democracyProportional representationGovernment formationPolicy dynamicsLack of commitmentInefficiency

JEL Classification

D7C7H1

Copyright information

© Springer-Verlag 2011