DP14858 Electoral Competition with Costly Policy Changes: A Dynamic Perspective
|Author(s):||Hans Gersbach, Matthew O. Jackson, Philippe Muller, Oriol Tejada|
|Publication Date:||June 2020|
|Keyword(s):||costs of change, democracy, dynamic elections, Markov perfect equilibrium, Political Polarization|
|JEL(s):||C72, C73, D72, D78|
|Programme Areas:||Public Economics, Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14858|
We analyze dynamic electoral competition policy changes. The costs of changing a policy increase with the extent of the shift and generate an incumbency advantage. We characterize the dynamics of Markov equilibria in terms of history and party polarization, and analyze how policies are influenced by the amplitude and convexity of costs of change, as well as by the degree of party and voter farsightedness. Regardless of the initial policy, party choices converge in the long run to a stochastic alternation between two (regions of) policies, with transitions occurring when office-holders suffer a shock to their capacity or valence. Although costs of change have a moderating effect on policies, full convergence to the median voter position does not take place.