Working Paper: CEPR ID: DP5175
Authors: Hans Gersbach; Verena Liessem
Abstract: When politicians are provided with insufficient incentives by the democratic election mechanism, social welfare can be improved by threshold contracts. A threshold contract stipulates the performance level that a politician must reach in order to obtain the right to stand for re-election. 'Read my lips' turns into 'read my contract'. Politicians can offer the threshold contracts during their campaign. These threshold contracts do not violate the liberal principle of free and anonymous elections in democracies.
Keywords: democracy; elections; threshold contract
JEL Codes: D72; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Threshold contracts (D86) | effort exerted by politicians (D72) |
| effort exerted by politicians (D72) | social welfare (I38) |
| Threshold contracts (D86) | social welfare (I38) |
| Performance level required by threshold contracts (D86) | reelection probabilities (D79) |