Machiavellian Fair Play: Electoral Incentives to Implement Programmatic Transfers

If a welfare transfers policy is programmatic (it is non-partisan, transparent and persisting), is it irrelevant for politicians' electoral fortunes? I study a probabilistic voting model with symmetric uncertainty in which an incumbent politician, of high or low competence, can design a programmatic transfers policy that supports low income citizens but which shrinks the per-period budgets for public goods provision. In my framework, competent politicians can perform better at the provision of public goods and transfers are less informative about their underlying ability. I show that these conditions allow the incumbent to reap electoral rewards through the strategic allocation of the budget. When the incumbent increases the budget to public goods by reducing transfers, two effects arise: his performance in office today would reveal more information about his identity (an informativeness effect), and voters' anticipation of narrow transfers tomorrow would increase the salience of political selection (an stakes effect). From the incumbent's viewpoint, these two effects go in opposing directions and, as a consequence, the equilibrium transfers policy emerges from their optimal balance. Finally, I explain how existing studies on the effects of programmatic transfers are unlikely to be able to measure its electoral impact.

Merchants of Reputation: Privatization under Elites' Outside Lobbying

An economic elite wants to buy a public asset, whose fate is determined by an incumbent politician who can be of high or low competence. The elite endogenously chooses a price for the asset, after which the incumbent decides whether to take it or not. In my framework, privatizing the asset would increase the budget that the incumbent handles today and, thereby, the amount of voter learning about his underlying ability: his valuation of this effect can be positive (he craves information revelation) or negative (he is information averse). Everything else being equal, both the direction and the magnitude of this valuation determines the prices at which he would accept to sell the public asset —which I call the ``intensive margin". This paper uncovers how this intensive margin creates an incentive for the elite to leverage their offer by committing to an outside lobbying strategy ex-ante, so as to get the asset as cheaply as possible. In my framework, outside lobbying involves the elite's use of their media to persuade voters that the incumbent is incompetent. The elite chooses whether to attack him before they make an offer, or to make him an offer that carries the threat of a persuasion attempt if he refuses to sell. I show that the elite's optimal strategies take two broad forms on the equilibrium path: if the incumbent craves for information revelation, then the elite employs attacks; and if he is information averse, then the elite employs threats. Finally, this paper highlights that even in the absence of traditionally studied channels of influence (such as bribery), the elite can still cause non-trivial distortions in the decisions that office-holders take.