Legislative Bargaining with Endogenous Rules

Abstract

We study repeated legislative bargaining in an assembly that chooses its bargaining rules endogenously, and whose members face an election after each legislative term. An agenda protocol or bargaining rule assigns to each legislator a probability of being recognized to make a policy proposal in the assembly. We predict that the agenda protocol chosen in equilibrium disproportionately favors more senior legislators, granting them greater opportunities to make policy proposals, and it generates an incumbency advantage to all legislators. 1 Keywords: Legislative bargaining, bargaining rules, seniority, incumbency advantage, endogenous institutions, dynamic bargaining. 2Legislative rules a¤ect legislative outcomes. But where do these rules come from?Legislators bargain over them. Once procedural protocols are in place, legislators bargain over policy. The chosen procedural rules thus have important consequences for bargained policy outcomes. We wish to understand how rules are chosen and their e¤ect on policy.The literature on legislative bargaining (Binmore 1986; Baron and Ferejohn 1989; Merlo and Wilson 1995; Baron 1996; Morelli 1999; Banks and Duggan 2000, among many others) typically assumes that bargaining occurs under …xed rules. But this isn't always so -rules are often chosen by the agents themselves before their actual policy bargaining begins. Each chamber of the U.S. Congress, for example, is a "self-governing"group and, as implored by Article I, Section 5 of the U.S. Constitution ("each House may determine the Rules of its Proceedings"), establishes its own rules rather than accepting exogenous ones.We build from two key premises: the set of bargaining legislators is determined by elections in each period, and legislators choose the institutional rules that govern their bargaining game. We thus present an electoral dynamic theory of endogenous institutions.Our main result is to characterize the stationary equilibrium that maximizes incumbents' utility.The shadow of a future election looms large in the incumbents' choice of contemporaneous legislative rules. Incumbent legislators seek to be reelected, so they choose rules that help them secure this goal (Mayhew 1974). We identify the bargaining rule that helps them the most. This rule grants disproportionate proposal power to senior legislators, who use it to obtain more favorable policies and a greater share of resources for their constituencies. We demonstrate that this induces voters in every district to prefer reelecting their incumbent to electing a newly minted legislator. In addition to its relevance to the internal politics of the legislature and to electoral outcomes, seniority practices dramatically a¤ect policy-payo¤ inequality across districts as a consequence of 3 distributive advantages enjoyed by those privileged in agenda rules. 2 McKelvey and Riezman (1992) -hereafter MR92 -were the …rst to prove that the institution of a seniority rule can bene…t each incumbent legislator in his or her pursuit of reelection. MR92 compare two...

Legislative and Multilateral Bargaining

“…In Diermeier et al (2015) and Diermeier et al (2016), the recognition probabilities are determined through bargaining before bargaining over policy takes place. In McKelvey & Riezman (1992), McKelvey & Riezman (1993), Muthoo & Shepsle (2014) and Eguia & Shepsle (2015), recognition probabilities are determined through seniority which is endogenously determined through elections at the end of each legislative session. Cardona & Polanski (2013) study the effects of the voting quota on the social cost of rentseeking in a spatial bargaining model.…”

Legislative bargaining and partisan delegation

“…A natural way of determining the party leadership is to employ some form of a seniority system. This suggests that it would be worthwhile to consider a repeated game version of our model in which seniority can play a substantive role, as it does in the legislative bargaining models of McKelvey and Riezman (1992, 1993), Muthoo and Shepsle (2014), and Eguia and Shepsle (2015).…”

“…McKelvey and Riezman (1992, 1993), Muthoo and Shepsle (2014), Eguia and Shepsle (2015), and Jeon (2015) all considered repeated versions of a divide-the-dollar game in which the recognition probabilities evolve over time. In the case of McKelvey and Riezman (1992, 1993), Muthoo and Shepsle (2014), and Eguia and Shepsle (2015), legislators agree to implement a seniority system whose recognition probabilities depend on relative seniority. In the case of Jeon (2015), a legislator’s recognition probability is an increasing function of his previous period’s share of the dollar.…”

Reputation Effects and Incumbency (Dis)Advantage

“…However, rational prospective voters must evaluate the value of re-electing an incumbent versus replacing him with a new politician. Scholars have nevertheless shown that an incumbency advantage can emerge due to noisy signaling by incumbents using messages that are payoff irrelevant to voters (Caselli, Cunningham, Morelli and Moreno de Barreda, 2014), voters imperfectly observing previous electoral margins (Fowler, 2018), or learning by doing (Dick and Lott, 1993) and legislative seniority rules (Muthoo and Shepsle, 2014;Eguia and Shepsle, 2015). Incumbency disadvantage can emerge when a politician's ability to secure personal rents increases with tenure (Klašnja, 2016).…”

“…The crux of our theory is a decline in the effects of accountability over a politician's tenure in office; this decline may owe to either the politician's political horizon (under term limits, as in Sections 1-2) or from the electorate's information (when type is revealed in office, as in Section 3). One can view our theory as combining this decline with the nature of reputation effects to offer a unified microfoundation for why politicians may become more effective (Dick and Lott, 1993;Muthoo and Shepsle, 2014;Eguia and Shepsle, 2015) or more corrupt (Klašnja, 2016) over their career; the former emerges under bad reputation effects while the latter emerges under good reputation effects.…”