How Elections Matter: Theory and Evidence from Environmental Policy

Abstract

This paper explores to what extent secondary policy issues are influenced by electoral incentives. We develop a two-dimensional political agency model, in which a politician decides on both a frontline policy issue and a secondary policy issue. The model predicts when the incumbent should manipulate the secondary policy to attract voters. We test our model by using panel data on environmental policy choices in the U. S. states. In contrast to the popular view that secondary policies are largely determined by lobbying, we find that there are strong effects of electoral incentives. I. INTRODUCTION One of the defining features of representative democracies is periodic elections. At the end of each term, voters have the opportunity to reward the incumbent politician with reelection or to replace him with a challenger. This ability of voters to hold the incumbent accountable for his policy choices should in turn act as a powerful incentive instrument for politicians to conduct policies that voters reward with reelection. While there is some consensus that the disciplining effect of elections has an impact on “frontline” policy issues such as the level of government spending or the degree of income and wealth redistribution, there is widespread skepticism whether secondary policy issues, which substantially affect only small groups in society, are influenced by electoral incentives. Typical examples of such secondary policy issues are environmental policy, gun control, foreign aid, or trade policy. This view is fueled by two main arguments. First, political competition is inherently multidimensional—politicians decide on a range of policy issues during each term in office. In the election, however, voters only have the binary option of retaining the incumbent or replacing him with a challenger. Voters are therefore unable to separately sanction specific policy choices of the incumbent. Second, given the multi