Working Paper: CEPR ID: DP8960
Authors: Gilles Saint-Paul; Davide Ticchi; Andrea Vindigni
Abstract: We develop a theory of endogenous political entrenchment in a simple two-party dynamic model of income redistribution with probabilistic voting. A partially self-interested left-wing party may implement (entrenchment) policies reducing the income of its own constituency, the lower class, in order to consolidate its future political power. Such policies increase the net gain that low-skill agents obtain from income redistribution, which only the Left (but not the Right) can credibly commit to provide, and therefore may help offsetting a potential future aggregate ideological shock averse to the left-wing party. We demonstrate that political entrenchmen by the Left occurs only if incumbency rents are sufficiently high and that low-skill citizens may vote for this party even though they rationally expect the adoption of these policies. We also discuss the case where the left-wing party may have the incentive to ex-ante commit to not pursue entrenchment policies once in power. Finally, we show that, in a more general framework, the entrenchment policies can be implemented also by the right-wing party. The comparative statics analyzes the effects of state capacity, a positive bias of voters for one party and income inequality on the incentives of the incumbent party to pursue entrenchment policies. The importance of our theory for constitutionally legislated term limits is also discussed. The theory sheds light on why left-wing parties or politicians often support liberal immigration policies of unskilled workers, are sometime in favor of free trade with less developed economies and of globalization more generally, or fail to reform plainly
Keywords: checks and balances; constituencies; inefficient redistribution; inequality; political entrenchment; political rents; state fiscal capacity
JEL Codes: D72; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Left-wing parties may implement entrenchment policies that reduce the income of their lower-class supporters (P26) | Consolidate future political power (D72) |
| Higher incumbency rents (R21) | Increase likelihood of entrenchment (D72) |
| Level of rents (R21) | Likelihood of entrenchment (D72) |
| Left's choice to reduce income inequality (D31) | Increases perceived value of income redistribution among the poor (H23) |
| Expectations of constituents to support left-wing parties (D72) | Support despite anticipated future losses from entrenchment policies (G32) |
| Right-wing parties might adopt similar entrenchment strategies under certain conditions (P14) | Expands causal framework to include party behavior across the political spectrum (D72) |