Political Economics

Question 1

Basic set up and assumptions of Downsian model of electoral competition

Answer 1

1. 2 office-seeking parties compete in election (only objective = gain political office)
2. Uni-dimensional political choice (over level of government spending (g))
3. Citizens vote for party whose proposed level of g gives highest expected utility
4. Voting costless, so ‘paradox of voting’ avoided and turnout = 100%
5. Single-crossing property (if median voter prefers 1 proposal over other, at least ½ of electorate will agree)

Question 2

Factors that influence extent to which Downsian electoral competition delivers outcome closer to social optimum

Answer 2

1. Degree of inequality aversion in SWF
2. Skewness of income distribution
3. Turnout

Question 3

P+T’s standard model of electoral competition:

assumptions about policy-maker?

Answer 3

1. Choose g
2. Finance g through proportional tax
3. Each citizen taxed at rate t (no targeting)

Question 4

P+T’s standard model of electoral competition:

assumptions about individual policy preferences?

Answer 4

1. Single-peaked

2. Satisfy single-crossing property

Question 5

P+T’s standard model of electoral competition:

how re-write individual consumption term?

Answer 5

Ci = (1-t) * yi

Question 6

P+T’s standard model of electoral competition:

how re-write tax rate term?

Answer 6

t = g / y

Question 7

P+T’s standard model of electoral competition:

intuition for why preferred level of government spending decreases w/income?

Answer 7

proportional taxes mean richer citizens pay larger % of tax burden, but receive same g

Question 8

When does Downsian electoral competition produce an efficient level of government spending in line with utilitarian normative benchmark?

Answer 8

Income of median voter = average income (only true when turnout = 100% and the income distribution is symmetric)

Question 9

Verba et al (1995)

Answer 9

Individual turnout strongly correlated w/income

Question 10

Evidence that individual turnout strongly correlated w/income

Answer 10

Verba et al (1995)

Question 11

UK turnout in 2017 general election?

Answer 11

63%

Question 12

Why is P+T’s ideological model of voting a probabilistic voting model?

Answer 12

Vote share depends on the value of delta (random event from perspective of candidates)

Question 13

Why is there platform convergence in P+T’s ideological model of voting?

Answer 13

Both candidates face symmetric problems

Question 14

Result of P+T’s ideological model of voting?

Answer 14

Candidates converge to favoured policy of income group w/most swing voters (rather than median voter)

Question 15

1. What do candidates converge to in P+T’s ideological model of voting?
2. Which group does this relate to in their mode? Due to what assumption?

Answer 15

1. Candidates converge to favoured policy of income group w/most swing voters (rather than median voter)
2. Rich assumed to be less ideologically polarised and so equilibrium spending close to preferred level of rich group

Question 16

In P+T’s ideological model of voting, when is the difference between the outcome of electoral competition and optimal spending level larger? Under what assumption?

Answer 16

Assumption - rich group least ideologically polarised

1. Rich group larger (more votes to be gained)
2. Rich group richer relative to middle-class (have higher stake in economic policy)

Question 17

General lessons of P+T’s ideological model of voting voting model?

Answer 17

1. Ideological shifts in population systematically alter political power of different groups
2. Ideologically neutral groups w/many mobile voters (willing to swing vote for small changes in economic policy) become attractive target for office-seeking politicians

Question 18

Key changes to basic model in P+T’s model of local public good provision?

Answer 18

1. Geographically distinct groups indexed by J
   (i) But everyone has same income y
2. Targeted, group-specific public good provision
3. Non-targeted lump-sum taxation

Question 19

1. How might parties behave in multi-party system?

2. Example?

Answer 19

1a. Might expect coalition-formation w/coalitions behaving in quite a “Downsian” way, converging on median voter
1b. Parties likely to ‘water down’ distinctive electoral platforms to give policy concessions and form coalitions
1c. Main predictor of coalition formation – policy/ideological distance between parties

2. Example – Conservative/Liberal Democrat coalition in 2010