Efficiency, Welfare, and Political Competition

Felix J. Bierbrauer and Pierre Boyer

The Quarterly Journal of Economics, 2016, vol. 131, issue 1, 461-518

Abstract: We study political competition in an environment in which voters have private information about their preferences. Our framework covers models of income taxation, public-goods provision, or publicly provided private goods. Politicians are vote-share maximizers. They can propose any policy that is resource-feasible and incentive-compatible. They can also offer special favors to subsets of the electorate. We prove two main results. First, the unique symmetric equilibrium is such that policies are surplus-maximizing and hence first-best Pareto-efficient. Second, there is a surplus-maximizing policy that wins a majority against any welfare-maximizing policy. Thus, in our model, policies that trade off equity and efficiency considerations are politically infeasible. JEL Codes: C72, D72, D82, H21, H41, H42.

Date: 2016
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Working Paper: Efficiency, Welfare, and Political Competition (2014)
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