Legislative Equilibria and Economic Policy under Alternative Electoral Rules

Abstract

This paper develops a game theoretic model in which S incumbent legislators simultaneously allocate effort between producing non-excludable public goods, targeting local goods to particular geographic constituencies, and engaging in rent-seeking. The game’s equilibria are determined by both the profile of the electorate and the electoral institution in place. Closed-List Proportional Representation (CLPR) is characterized by a fundamental collective action problem which leads to high levels of shirking among incumbent legislators. Single-Member District (SMD) systems are effective at resolving this collective action problem when voters are highly responsive to public good provision. Open-List Proportional Representation (OLPR) systems are effective at resolving this collective action problem when voters exhibit low responsiveness to public policy. Indeed, OLPR generates high levels of policy effort in electoral contexts where both CLPR and SMD systems are characterized by high rent-seeking. The model provides a wide range of implications for future empirical studies of the relationship between electoral institutions and economic policy.