Legislative bargaining and the dynamics of public investment

Marco Battaglini, Salvatore Nunnari and Thomas Palfrey

Discussion Papers, Research Unit: Market Behavior from WZB Berlin Social Science Center

Abstract: We present a legislative bargaining model of the provision of a durable public good over an infinite horizion. In each period, there is a societal endowment which can either be invested in the public good or consumed. We characterize the optimal public policy, defined by the time path of investment and consumption. In each period, a legislature with presentatives of each of n districts bargain over the current period's endowment for investment in the public good and transfers to each district. We analyze the Markov perfect equilibrium under different voting q-rules where q is the number of yes votes required for passage. We show that the efficiency of the public policy is increasing in q because higher q leads to higher investment in the public good and less pork. We examine the theoretical equilibrium predictions by conducting a laboratory experiment with fiveperson committees that compares three alternative voting rules: unanimity (q=5); majority (q=3); and dictatorship (q=1).

Keywords: dynamic political economy; voting; public goods; bargaining; experiments (search for similar items in EconPapers)
JEL-codes: C78 C92 D71 D72 H41 H54 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cdm, nep-exp, nep-gth, nep-mic, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Related works:
Journal Article: Legislative Bargaining and the Dynamics of Public Investment (2012)
Journal Article: Legislative Bargaining and the Dynamics of Public Investment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbmbh:spii2011205

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