Informed politicians and institutional stability
This dissertation examines two aspects of democratic institutions.
The first chapter studies the welfare implications of politicians who assume either the role of delegates or trustees in a representative democracy. I identify conditions under which the latter is preferable to the former. In this model, voters are uninformed about the value of a policy-relevant state. Two informed politicians compete for votes by committing to state-contingent policy platforms that may or may not reveal information about the underlying state. After the election, the winning politician announces the state and implements the relevant policy.
I find that if voters' policy preferences are not too sensitive to changes in the state, then the two politicians offer divergent policy platforms. In addition, the main result characterizes Perfect Bayesian Equilibria in which the offered platforms are non-revealing menu contracts, and the resulting welfare is higher than in any separating equilibrium. Such is the case when voters are sufficiently valence-driven and direct benefits to politicians are sufficiently important. The result provides a welfare explanation for why voters may defer policy choices to an elected representative, rather than select a politician that reflects their policy preferences based on information revealed in political competition.
The second chapter explores whether there are systematic differences in institutional stability between democracies and non-democracies. It exploits data on 56 countries that have experienced institutional change between 1980-2007. Since the institution variable is correlated with unobservables in the determination of institutional change, a maximum likelihood estimation that does not control for this correlation will yield biased estimates. Assuming that the endogeneity operates solely through country fixed effects, I estimate the likelihood of institutional change using fixed effects probit with bias correction.
I find that the consistently significant factor affecting institutional change is the interaction between democracy and the percentage of democracies in the world. The coefficient is negative and significant, which suggests that being a democracy has a positive externality on the stability of other democracies. Further classification of political institutions into democracy, autocracy, and intermediate ranges yields stronger results confirming this argument. Whether or not being a democratic institution directly affects a country's likelihood of institutional change depends on the assumption about the source of the endogeneity of the institution variable.
0615: Political science