Designing Democracies for Sustainability

Gersbach, Hans; Kleinschmidt, Tobias

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Designing Democracies for Sustainability

29 Pages Posted: 9 Nov 2004

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Research; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Tobias Kleinschmidt

Heidelberg University - Faculty of Economics and Social Studies

Date Written: September 2004

Abstract

Democratic processes may not take the welfare of future generations sufficiently into account and thus may not achieve sustainability. We show that the dual democratic mechanism - rejection/support rewards (RSRs) for politicians and elections - can achieve sustainability. RSRs stipulate that incumbents who are not re-elected, but obtain the majority support among young voters receive a particular monetary or non-monetary reward. Such rejection/support rewards induce politicians to undertake long-term beneficial policies, but may invite excessive reward-seeking. We identify optimal RSRs under different informational circumstances.

Keywords: Democracy, elections, incentive contracts, sustainability, rejection/support rewards

JEL Classification: D72, D82, H55, Q56

Suggested Citation: Suggested Citation

Gersbach, Hans and Kleinschmidt, Tobias, Designing Democracies for Sustainability (September 2004). Available at SSRN: https://ssrn.com/abstract=617307