The Optimal Length of Political Terms

Abstract

Periodic elections are the bedrock of democracy, but the power they grant to the median voter is a source of dynamic inefficiencies. We analyze the optimal frequency of elections (equivalently, the optimal term-length) to minimize such inefficiencies. To do so, we build a dynamic model in which (i) the candidates of two polarized parties compete for office and the median voter shifts over time, capturing both the changes in the electorate’s preferences and the volatility of election outcomes, (ii) office-holders determine policy and experience persistent random shocks to their effectiveness, and (iii) policy changes are costly for citizens and politicians. Optimal term-length then balances the frequency of costly policy changes when parties change office with the incumbent’s average effectiveness during tenure. Our baseline model is augmented with further factors that may affect optimal term-length, which allows us to offer several comparative statics about this key institutional variable, and hence about the structure of democracy.