Economic retrospective voting and incentives for policymaking

Abstract

This paper explores the possibility that the punishment–reward strategy known as economic retrospective voting provides incentives to pursue good economic policies. By “good” we mean policies that enhance efficieny and reduce economic rents. The key hypothesis is that in those countries whose electoral arrangements and governing institutions yield high clarity of responsibility, a resultant high level of retrospective voting should compel incumbent parties to be more vigorous in the pursuit of efficiency-enhancing policies, or at least less vigorous in creating rents. In countries where the clarity of responsibility is low, the more tenuous linkage between economic performance and electoral success should leave incumbent governments less motivated to promote efficiency and to eliminate rents. As hypothesized, countries low in clarity of responsibility appear to be more inclined to subject their economies to over-regulation and to engage in higher levels of transfers and subsidies. On several other policy dimensions, however, there were no discernable differences between high and low clarity of responsibility countries.