A Structural Model of Government Formation

Abstract

In this paper we estimate a bargaining model of government formation in parliamentary democracies. We use the estimated structural model to conduct constitutional experiments aimed at evaluating the impact of institutional features of the political environment on the duration of the government formation process, the type of coalitions that form, and their relative stability.

Corruption and power in democracies

“…We suppose, following Diermeier et al (2003), that the formateur negotiates with, rather than makes exclusive proposals to, a chosen protocoalition. SpeciÞcally, the formateur shares power with that party whose agreed program with the formateur yields the larger joint surplus.…”

Proto-coalition bargaining and the core

“…This is neglected in the existing applications of proto-coalition bargaining. For example, Diermeier et al (2003) assume that the recognition probabilities are exogenous and satisfy (slightly adapting notation and neglecting cases where single parties have absolute majority)…”

“…(A1) "more is better" in every coalition, (A2) separability of distributive preferences and coalition preferences, (A3) the status quo is bad but better than nothing, and (A4) players prefer small coalitions. In relation to the existing literature, assumptions (A1) and (A4) are implied by typical models of random proposer bargaining, (A3) is standard, and (A2) is satisfied for example under linear separability as assumed by Diermeier et al (2003). The term ∆ i (c, c ) that is implicitly defined in (A2) represents the compensation i requires when changing from c to c.…”

“…The estimated structural models, in turn, have been used in counterfactual policy experiments to study institutional and constitutional design (Diermeier et al, 2002(Diermeier et al, , 2003(Diermeier et al, , 2007. In this paper, I analyze an extension to the model of proto-coalition bargaining that will be shown to account for two additional phenomena that the standard model fails to explain in equilibrium: (i) F cannot always install his preferred coalition (even if the default payoffs are low) and (ii) coalition members that are "important" (to be specified) have more bargaining power in the subsequent negotiations than other parties.…”

“…The strategic relevance of the coalition preferences of F in relation to those of the other players is empirically obvious (as different parties have different political platforms and hence prefer to coalesce with different partners), but their relation is irrelevant in the one-round model. In contrast, the standard one-round model explains deviations from F's favorite choice by assuming either high default payoffs or bounded rationality of F (as in logit choice functions, see Diermeier et al, 2003). Allowing F to revise rejected proposals eliminates this neglect of the standard model.…”