Intra-Party Discipline, Rent Extraction and Electoral Rules¤

Intra-Party Discipline, Rent Extraction and Electoral Rules¤ Benoit S Y Crutzeny This Draft: March 2004 Abstract This paper analyzes how intra-party competition a®ects rent extraction. We show that the career-concern motives that in°uence rent extraction by individual politicians are sensitive to intra-party discipline. Compared to majority rule, proportional representation o®ers parties a broader range of devices to discipline politicians, thanks to its electoral lists. The active use of these lists by the party is proven to yield outcomes that increase the electorate's welfare under proportional representation relative to majority rule. These results also o®er a new interpretation of the available empiri- cal evidence. Keywords: Party Discipline; Rents; Electoral rules JEL classi¯cation: D72, H41 ¤I am indebted to Micael Castanheira, Catherine Dehon, Estelle Malavolti, Abdoul Noury and Nicolas Sahuguet for their insightful suggestions and their time during the preparation of this draft. Many thanks too to seminar participants at ECARES. yCorrespondence address: ECARES { C.P. 114, Universit¶e Libre de Bruxelles, 50 F D Roosevelt Ave, B-1050 Brussels, Belgium. Tel: +32-2-650.33.75; fax: +32-2-650.40.12; email: [email protected] 1 "When it comes to electoral rules, the devil is in the details". (Persson and Tabellini, 2004: 15) 1 Introduction Elected o±cials have plenty of opportunities to abuse their positions. Once in o±ce, incumbents can easily extract rents from the budget they control. This may go against the interest of the electorate, because resource diversion decreases their welfare. And it may also go against the interests of the incumbents' own party, because its objectives may not coincide totally with those of its politicians. How to control politicians is a question that has received substantial attention in the Political Economics literature. Seminal contributions include Barro (1973) and Ferejohn (1986). Myerson (1993, 1999) and Persson, Roland and Tabellini (1997) extend this strand of the literature by examining the role of the electoral rule and regime. Yet, all these contributions maintain the classical Downsian assumption that parties are unitary actors, that is, that parties and politicians are perfect substitutes. As a consequence, the role played by parties, in addition to voters, in controlling individual politicians is out of their reach, by construction. Hence, of the three fundamental characteristics of electoral rules { district magnitude, the electoral formula and the ballot structure { these analyses can only examine how the ¯rst two impact on the control of politicians. The role of the third, the ballot structure, is left out of the analysis.1 The main contribution of this paper is to let parties be groups or organizations. Once parties and politicians are modelled as di®erent actors, parties become 'political interme- diaries', to borrow from the terminology of Caillaud and Tirole (1999, 2002), and the control of politicians becomes two-dimensional: the electorate exerts some control on parties and politicians through its voting decisions, and parties exert some control on politicians through their decisions regarding their internal governance structure. This implies in turn that, if seeing parties as organizations allows us to examine the role played by the ballot structure, we can also split the e®ect of political competition along two complementary dimensions: a horizontal and well known one, where the focus is on competition between politicians belonging to di®erent parties { label it inter-party competition; and a vertical one, which has been overlooked by most until now, where competition takes place between politicians within the same party { we label this dimension intra-party yardstick competition. 1District magnitude refers to the proportion of the legislature that is elected in each district. The electoral formula governs how vote shares are translated into seat shares. Finally, the ballot structure governs how the electorate casts its votes. 2 To facilitate comparisons with the literature, our analysis builds on the textbook model of Persson and Tabellini (2000). They put forward a career-concern model where parties are viewed as groups of purely rent-seeking politicians and study how electoral rules shape the individual politicians' incentives to perform once in o±ce. They compare individual rent extraction under majority rule and closed-list proportional representation (PR). Un- der closed-list PR, voters do not have the option of voting for single politicians, but can only vote for their favorite party, which presents voters with a ¯xed and non-negotiable list of party candidates. Hence politicians are not individually accountable to voters anymore. This implies in turn that the intra-party arrangements governing the writing down of the electoral lists o®ered to the electorate become of primary importance. Yet, the authors analyze only the benchmark case in which intra-party yardstick competition is completely absent: each politician's position on the electoral list is given once and for all and cannot be modi¯ed. With this simplifying assumption at hand, their results highlight that PR may be associated with weak incentives for individual politicians to perform once in o±ce and therefore higher equilibrium rent extraction than majority rule. The authors having abstracted from the role played by the vertical dimension of political competition, one may wonder how the introduction of intra-party yardstick competition a®ects their results. Filling this gap is the core goal of the paper. In order to do this, we need to model more precisely the internal organizational details governing political parties. Roemer suggests that parties typically consist of three di®erent factions of individuals: the candidates, the rank-and-¯le and the militants (Roemer, 2001: 7). To make our life easier, we neglect the role of militants and let parties have a two-tier structure with the rank- and-¯le on the one hand and the politicians running for election on the other. This allows us to deliver most clearly the main message of the paper: the electoral lists characterizing closed-list PR are double-edged knifes. If lists may reduce the accountability of individual politicians to the electorate, thereby exacerbating the agency problem between the electorate and incumbents, as argued by Persson and Tabellini (2000), we show that these same lists can also be used by the party to increase accountability of individual politicians to the party and therefore reduce the extent of the intra-party agency problem. Main Results We start by opening the political party's black box. We let the party { that is, the rank-and-¯le { and its politicians disagree on the preferred policy.2 Indeed, individual politicians are unlikely to internalize the e®ects of their individual decisions on the re- election prospects of the party as a whole. To answer the question of how equilibrium policy is in°uenced by the intra-party agency problem, the paper suggests two di®erent 2Without disagreement on policy parties and politicians would become again perfect substitutes and there would be no scope for intra-party competition! 3 mechanisms that may allow the party to discipline its politicians. The ¯rst mechanism we focus on is present under PR but absent under majority rule: the electoral lists. Once we let parties actively use these lists to discipline individual incumbents (a case we label conditional-list PR), the political career-concern game yields outcomes that make the electorate's welfare higher under PR. Thus, one can view conditional-list PR as a means of steepening the electoral competition incumbents face: not only are they challenged by the opposition party, as usual, but they are also held accountable by their own party, indirectly, through the intra-party competition for the best positions on the party list. The second mechanism we study is more direct: we let parties commit to ¯ring incompetent incumbents and replacing them with new candidates prior to the new election. We show the threat of ¯ring incompetent politicians lowers equilibrium rent extraction under majority rule. Yet, the reduction in equilibrium rent extraction is stronger under PR, implying that, as is the case with the previous mechanism, voters are better o® under closed-list PR than under ¯rst-past-the-post. The main conclusion we can therefore draw from our analysis is that the addition of a second, vertical competitive dimension highlights that the comparative politics results are sensitive to the degree of intra-party discipline. How reasonable is it to believe that intra-party institutional arrangements have such an important impact on real world policies, as compared to, for example, reforms modifying the electoral rule or regime? Given that a switch to a new electoral rule usually requires a constitutional reform, any such change is more costly than a simple modi¯cation of a party's internal governance structure. This may explain why major electoral reforms are not as commonly observed or advocated as one might be lead to expect. In this case, less costly disciplining devices such as the ones examined in this paper may be favored by political parties. Indeed, we strongly believe that real world prima facie evidence does point out that the most prominent and best performing politicians are guaranteed the safest electoral seats, whereas younger politicians are relegated to much riskier positions, at least until they have proven their worth.3 Thus, the use of conditional-list PR may be a lot more pervasive than commonly believed.4 Related Literature This paper is not the ¯rst to study how inter-party and intra-party competition impact on the control of politicians. A branch of the political science literature adopts this strategy too. Important contributions include Cain, Ferejohn and Fiorina (1984, 1987) and Carey and Shugart (1995). They partition electoral rules according to whether they are party- 3In our setup, the safest positions are the ones at the top of the list.

Load more