Discussion paper

DP14858 Electoral Competition with Costly Policy Changes: A Dynamic Perspective

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.

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Citation

Gersbach, H, M Jackson, P Muller and O Tejada (2020), ‘DP14858 Electoral Competition with Costly Policy Changes: A Dynamic Perspective‘, CEPR Discussion Paper No. 14858. CEPR Press, Paris & London. https://cepr.org/publications/dp14858