The Stakes and Informativeness Trade-Off: Electoral Incentives to Implement Programmatic Transfers

Abstract

If a transfers policy is programmatic (it is transparent and nonmanipulable), is it irrelevant for politicians’ electoral fortunes? I show that the answer is negative using a political agency model with symmetric uncertainty. In my setup, an incumbent can allocate a budget to public goods and transfers. While the payoffs from transfers tend to be permanent, the payoffs from public good provision tend to depend on the incumbent’s competence. When the incumbent increases the budget to public goods, two effects arise: his performance in office today reveals more information about his identity (an informativeness effect) and voters’ anticipation of narrow transfers tomorrow increases the salience of political selection (a stakes effect). I show how the incumbent strategically takes into account these two effects in view of maximizing his electoral fortunes and detail how these theoretical findings can inform empirical analyses of the electoral consequences of programmatic transfers.