Endogenous voting in a partisan model with rational voters

Abstract

This paper introduces endogenous voting into a partisan political business cycle model. Voters' preferences between inflation and employment levels are assumed heterogeneous. Each individual votes for the political party whose election would yield him the least cost ex post. The election of a liberal government implies a partisan surprise that lowers unemployment but gives higher equilibrium inflation. The election of a conservative government implies the opposite. The magnitude of the partisan surprises depends inversely on party popularity, so both the equilibrium of the model and its comparative statics properties are modified when voting is endogenous.