Political Selection and the Optimal Concentration of Political Power

54 Pages Posted: 24 Feb 2017

See all articles by Andreas Grunewald

Andreas Grunewald

Frankfurt School of Finance & Management

Emanuel Hansen

University of Cologne - Department of Economics

Gert Pönitzsch

Heidelberg University - Alfred Weber Institute for Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 17, 2017

Abstract

This paper studies how policy choice and political selection are affected by the concentration of political power -- a central aspect of political institutions. We consider a setting with inefficient policy gambles: In equilibrium, politicians choose overly risky policies in order to appear competent and increase their electoral prospects. In this setting, variations in power concentration give rise to a previously undiscussed trade-off. On the one hand, power-concentrating institutions are beneficial because they allocate more political power to the voters' preferred candidate. On the other hand, these institutions induce the adoption of more overly risky policies and decrease the voters' capability to select well-suited politicians. We show that full concentration of power is optimal if and only if the conflict of interest between voters and politicians is small. Otherwise, voter welfare is maximized by an intermediate level of power concentration.

Keywords: Elections, Constitutional Design, Selection, Asymmetric Information

JEL Classification: D72, D82, H11

Suggested Citation

Grunewald, Andreas and Hansen, Emanuel and Pönitzsch, Gert, Political Selection and the Optimal Concentration of Political Power (February 17, 2017). Available at SSRN: https://ssrn.com/abstract=2922491 or http://dx.doi.org/10.2139/ssrn.2922491

Andreas Grunewald

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Emanuel Hansen

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany
++ 49 (0)221/470-8650 (Phone)

Gert Pönitzsch (Contact Author)

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany
+49 6221 54 2929 (Phone)

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