Lecture 10

1. Lecture 10 Institutions and policy outcomes Suggested readings: T. Persson and G. Tabellini, "Constitutions and economic policy", Journal of Economic Perspectives 18, 75-98, 2004

2. Institutions and policy outcomes • In the previous lecture, starting from the prediction of a simple model of political agency, we have analyzed the effect of term limits on policies • Term limits are a particular example of institutional rules • From this particular example, we understand that this specific rule has an effect on the behaviour of politicians • Collective decision making in democracies is subject to many rules that can affect the final policy

3. Electoral rules • Rules governing elections • Ex: majoritarian versus proportional systems • Rules governing candidate selection • Primaries vs. party nominations • Rules governing campaign financing and campaign contributions • Public vs. private financing

4. Rules governing elected representatives • Separation of Powers • Legislative vs. executive • Legislative • Unicameral versus bicameral • Committee • Executive • Presidential regimes vs. parliamentary regimes

5. Multiple level of government • States, regions, councils are also subject to similar rules • Furthermore, different rules regulate the relationship between central, state and local governments…

6. Institutions and policy outcomes • A vast theoretical and empirical literature analyses the alternative rules and their impact on policy making • Two examples • Majoritarian vs. proportional representation • Presidential vs. parliamentary regime

7. Majoritarian vs. proportional representation • Plurality rule • only the winner(s) of the highest vote share(s) get represented in a given district • Proportional representation • seats are awarded in proportion to votes in each district • Ballot structures (how citizens cast their ballot) • Voters can choose among individual candidates or among lists of candidates drawn up by the parties participating in the election.

8. Majoritarian vs. proportional representation • Anglo-Saxon countries often implement plurality rule with voting for individual candidates in single-member districts • Majoritarian systems • On the other hand, proportional representation is often implemented though a system of party lists in large districts, sometimes a single national district • Proportional systems

9. Parliamentary vs. Presidential democracy • In a presidential regime, the citizens directlyelect the executive • in a parliamentary regime, an elected parliament appoints the executive (the government)

10. Parliamentary vs. Presidential democracy • Parliamentary democracy • the government appointed by the parliament has executive powers • the government acts as the agenda setter, initiating all major legislation and drafting the budget. • In a presidential democracy with separation of powers (like the United States) • the president has full executive powers, but smaller agenda-setting powers

11. Parliamentary vs. Presidential democracy • Other important differences • In parliamentary democracies, the government remains in office only as long as it enjoys the support of a majority in the legislative assembly. • In presidential democracies the holders of these powers are separately elected and hold on to them throughout an entire election period.

12. Do constitutional rules affect electoral accountability? • The notion of electoral accountability we consider is the same we used in our model of political agency • Voters can reward/punish politicians for their behaviour (retrospective voting)

13. Ballot rules and accountability • Politicians may have stronger direct incentives to please the voters if they are held accountable individually, rather than collectively. • Hence, party lists discourage effort by office-holders because individual efforts are not connected with re-election prospects • Persson, Tabellini and Trebbi (2003) analyse the relationship between ballot rules and accountability in about 80 democracies in the 1990s using corruption measures as a proxy for politicians accountability • Main Finding: Party list is correlated with higher corruption

14. PINDP,PINDO=measure of seats allocated through party list Source: Personn-Tabellini-Trebbi (2003), Electoral rules and corruption

15. Presidential vs. parliamentary regime • Accountability can be stronger in presidential than parliamentary democracies (Persson, Roland and Tabellini, 1997, 2000). • In the presidential system the executive is directly accountable to the voters and this reduces the scope for collusion between executive and legislative (parliament) • Under presidential regimes there is a strong separation of powers • between the president and congress • congressional committees holding important proposal powers

16. Evidence on presidentialism and accountability • Among “good democracies”, Persson and Tabellini (2003) find that presidential regimes have less corruption than parliamentary regimes • This result does not hold among regimes classified as “bad democracies” • Since many presidential regimes are classified as “bad democracies”, the negative correlation between corruption and presidentialism in the sample of good democracies is due to relatively few observations (not very robust) • Kunicova and Rose-Ackerman (2001) classify presidential countries in a slightly different way, and obtain more negative empirical results: presidentialism seems to be associated with more widespread corruption, rather than less.

17. Conclusions • Institutions play an important role in determining policy outcomes • Several theoretical models analyse some specific set of rules in isolation • Analysing the interaction between different set of rules (electoral rules, separation of powers, campaign financing etc.) is very challenging but very interesting • Ongoing theoretical and empirical research in this direction