Working Paper: CEPR ID: DP14858
Authors: Hans Gersbach; Matthew O. Jackson; Philippe Muller; Oriol Tejada
Abstract: We analyze two-party electoral competition with a one-dimensional policy space, costly policy changes, and random negative shocks to a party's viability over an infinite horizon. We show the existence and uniqueness of stationary Markov perfect equilibria in which parties use so-called simple strategies. Regardless of the initial policy, party choices converge in the long run to a stochastic alternation between two policies, with transitionsoccurring if and only if parties suffer a negative shock to their viability. Although costs of change have a moderating effect on policies, full convergence to the median voter position does not take place when parties are polarized.
Keywords: democracy; dynamic elections; political polarization; costs of change; Markov perfect equilibrium
JEL Codes: C72; C73; D72; D78
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| costs of changing policies (E64) | incumbency advantage (D72) |
| negative capacity shocks (F41) | incumbency advantage (D72) |
| initial policy polarization (D72) | long-term policy paths (E61) |
| capacity shocks (D24) | transitions between policy states (P39) |
| costs of change (D23) | policy moderation over time (E63) |