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Macroeconomic Dynamics, 15, 2011, 656680. Printed in the United States of America. doi:10.1017/S1365100510000246
HANS GERSBACH
Center of Economic Research at ETH Zurich andCEPR
FELIX M
UHE
Center of Economic Research at ETH Zurich
Vote-buying is widely used by parties in developing countries to inuence the outcome of elections. We examine the impact of vote-buying on growth. We consider a model with a poverty trap where redistribution can promote growth. We show that vote-buying contributes to the persistence of poverty as taxed wealthy people buy votes from poor people. We then show that there exists a democratic constitution that breaks vote-buying and promotes growth. Such a constitution involves rotating agenda setting, a taxpayer-protection rule, and repeated voting. The latter rule makes vote-buying prohibitively costly.
Keywords: Vote-Buying, Political Economy, Poverty Traps, Economic Development,
Voting Rules, Repeated Voting
1. INTRODUCTION
Various studies suggest that vote-buying is an instrument widely used by parties in developing countries to inuence the outcome of elections.1 For example, buying votes is a long tradition in Mexico, the Philippines, Senegal, Taiwan, and Thailand. In the 2002 (community-level) elections in the Philippines, an estimated 3 million people were offered some form of payment. This corresponds to about 7% of all adults allowed to vote. In Thailand, 30% of the heads of households surveyed in a national sample said that they had been offered money during the 1996 general election. In Taiwans 1999 election, 27% of a random sample of voters reported that they had accepted cash offers during previous electoral campaigns.2
However, if vote-buying occurs, then the success of redistribution policies used to overcome poverty may be endangered. Vote-buying may be bad for society and may in particular prevent growth-promoting redistribution policies. There is both theoretical and empirical evidence supporting this view. Buchanan and Tullock (1962) argue that in vote markets, minority groupsfor example, the
We would like to thank Rafael Bauer, Margrit Buser, Hans-Jrg Beilharz, Jrgen Eichberger, Theresa Fahrenberger, Volker Hahn, Stephan Imhof, Matthew O. Jackson, Markus Mller, Jrg Oechssler, Lars Siemers, seminar participants in Heidelberg, and participants at the Annual Meeting of the European Public Choice Society (EPCS) 2006 in Turku for many valuable comments and suggestions. Address correspondence to: Hans Gersbach, Center of Economic Research at ETH Zurich, 8092 Zurich, Switzerland;...