DP11375 The Effects of Higher Re-election Hurdles and Costs of Policy Change on Political Polarization

Author(s): Hans Gersbach, Philippe Muller, Oriol Tejada
Publication Date: July 2016
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Programme Areas: Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11375

We develop and study a two-period model of political competition where (i) changes of policies impose costs on all individuals, and (ii) such costs increase linearly with the magnitude of the policy change. The contribution is two-fold. First, we show that intermediate marginal costs yield the lowest levels of policy polarization, welfare being a single-peaked function of the marginal cost. Second, we apply our model to the design of optimal re-election hurdles. We show that whatever the marginal cost of change, raising the vote-share needed for re-election above a half reduces policy polarization and increases welfare. We further prove the existence of a unique re-election hurdle that simultaneously maximizes welfare and minimizes policy polarization. The robustness of our results is studied for several extensions of the baseline model, notably for convex costs of change.