Candidate Entry, Screening, and the Political Budget Cycle

Abstract

We investigate whether relevant private information about citizens' competence in political office can be credibly revealed by their entry and campaign expenditure decisions, as opposed to choice of policy once in office. We find that this depends on whether voters and candidates have common or conflicting interests; only in the former case can entry be revealing in equilibrium. We apply these results to Rogoff's (1990) model of the political budget cycle, allowing for candidate entry, as well as elections: as interests are common, low-ability candidates are screened out at the entry stage, and so there is no signaling via fiscal policy (i.e. no "political budget cycle"). In a variant of the Rogoff model where citizens differ in honesty, rather than ability, interests are conflicting, and so the political budget cycle can persist in equilibrium.

Auctioning Public Office

“…Both papers argue that informed lobbies fund competent candidates only and voters can infer the candidates' types from observing campaign spending. Similarly, in [11], entry occurs only for candidates of high ability who signal their competence in the pre-entry stage by engaging in campaign spending.…”

“…In [6] and [13], citizen-candidates spend in order to enter the electoral race and as in [11], [14] and [15] when there are split contributions, no difference in spending is observed. Candidates spend the same amount and spending does not allow the electorate to distinguish between them.…”

Politicians’ motivation, political culture, and electoral competition

“…5 Relatedly, in Canes-Wrone, Herron, and Shotts (2001), Chiu (2002), and Maskin and Tirole (2002), politicians who care a lot about reelection may have a reputational incentive to implement inefficient policies which are popular among the electorate and reject efficient policies which are unpopular. Majumdar and Mukand (2004) and Slantchev (2003) consider a similar agency problem as we do and extend it in other directions.…”

“…4 Le Borgne and Lockwood (2002) endogenize candidate entry decisions in a Rogoff (1990)-style model and examine the implications for political budget cycles. In our paper, we abstract from the entry decision and, instead, focus on how heterogeneity in politicians' motivation among an existing pool of politicians affects politicians' incentives and their response to changes in politicians' pay and other features of the political process.…”

“…Majumdar and Mukand (2004) have recently shown that reputational concerns may induce incumbents to be too conservative or too radical in policy implementation. See also Biglaiser and Mezzetti (1997), Glazer (2002), andSuurmond, Swank, andVisser (2004).…”