We demonstrate that sharply different policy choices across democracies can be explained as a consequence of differences in the ability of political competitors to make credible pre-electoral commitments to voters. Politicians can overcome their credibility deficit in two ways. First, they can build reputations. This requires that they fulfill preconditions that in practice are costly: informing voters of their promises; tracking those promises; ensuring that voters turn out on election day. Alternatively, they can rely on intermediaries -patrons -who are already able to make credible commitments to their clients. Endogenizing credibility in this way, we find that targeted transfers and corruption are higher and public good provision lower than in democracies in which political competitors can make credible pre-electoral promises. We also argue that in the absence of political credibility, political reliance on patrons enhances welfare in the short-run, in contrast to the traditional view that clientelism in politics is a source of significant policy distortion. However, in the long run reliance on patrons may undermine the emergence of credible political parties. The model helps to explain several puzzles. For example, public investment and corruption are higher in young democracies than old; and democratizing reforms succeeded remarkably in Victorian England, in contrast to the more difficult experiences of many democratizing countries, such as the Dominican Republic.

We demonstrate that sharply different policy choices across democracies can be explained as a consequence of differences in the ability of political competitors to make credible pre-electoral commitments to voters. Politicians can overcome their credibility deficit in two ways. First, they can build reputations. This requires that they fulfill preconditions that in practice are costly: informing voters of their promises; tracking those promises; ensuring that voters turn out on election day. Alternatively, they can rely on intermediaries -patrons -who are already able to make credible commitments to their clients. Endogenizing credibility in this way, we find that targeted transfers and corruption are higher and public good provision lower than in democracies in which political competitors can make credible pre-electoral promises. We also argue that in the absence of political credibility, political reliance on patrons enhances welfare in the short-run, in contrast to the traditional view that clientelism in politics is a source of significant policy distortion. However, in the long run reliance on patrons may undermine the emergence of credible political parties. The model helps to explain several puzzles. For example, public investment and corruption are higher in young democracies than old; and democratizing reforms succeeded remarkably in Victorian England, in contrast to the more difficult experiences of many democratizing countries, such as the Dominican Republic.

W e present a theory of parties-in-legislatures that can generate partisan policy outcomes despite the absence of any party-imposed voting discipline. Legislators choose all procedures and policies through majority-rule bargaining and cannot commit to vote against their preferences on either. Yet, off-median policy bias occurs in equilibrium because a majority of legislators with correlated preferences has policy-driven incentives to adopt partisan agenda-setting rules--as a consequence, bills reach the floor disproportionately from one side of the ideological spectrum. The model recovers, as special cases, the claims of both partisan and nonpartisan theories in the ongoing debate over the nature of party influence in the U.S. Congress. We show that (1) party influence increases in polarization, and (2) the legislative median controls policy making only when there are no bargaining frictions and no polarization. We discuss the implications of our findings for the theoretical and empirical study of legislatures.

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This paper shows that when an executive has more policy expertise than the community that hired him, the particular institution used to monitor executive power is critical for promoting good performance. The contrast is between two basic accountability mechanisms: popular election of the executive (direct) and appointment by a popularly elected legislature (hierarchical). I develop a principal(s)-agent(s) model where a homogeneous community seeks to control a better informed executive in the face of adverse selection and moral hazard problems. The model predicts, perhaps unintuitively, that in the presence of expertise asymmetry hierarchical control can improve executive performance to a larger extent than direct control. First, by insulating the executive from popular opinion, thus reducing the good types' incentive to pander to an uninformed public; and second, because the executive is made accountable to a more informed principal, the legislature, thus improving the quality of monitoring bad executive types. The superiority of hierarchical control over direct control is more evident when policy issues are complex (as opposed to simple) and when the legislature is independent of the executive. I present evidence from U.S. municipal elections during 1970-1999 supporting the theoretical prediction that elected executives will manipulate simple policy issues for electoral purposes more so than appointed executives.