DP6497 | Vote-share Contracts and Democracy

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Publication Date

28/09/2007

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Abstract

In this paper we introduce vote-share contracts. Such contracts contain a vote-share threshold that incumbents must reach in order to be reelected. In a simple model, we illustrate the working of vote-share contracts. Such vote-share contracts curb socially detrimental incumbency advantages by improving the average ability level of re-elected politicians and also increase effort. We show that the socially optimal vote-share threshold for incumbents is larger than one half. Competing candidates offer vote-share contracts with socially optimal thresholds.