Political Competition over Property Rights Enforcement
Abstract: I analyze an economic mechanism that captures the idea that competition in the political arena helps good economic outcomes. In the model, heterogeneous agents can choose to appropriate others’ resources. A qualified electorate votes over proposals by two candidate office holders to determine the property rights enforcement regime. The outside option in the political game is being a citizen under the opponent’s regime and is generally better for more productive candidates. That is why the less productive candidate wins the election. He implements a regime that depends on the loser’s productivity. As a consequence, two societies with the same productivity distribution and the same office holder, but electoral runners-up with different productivity, face different alternatives and choose different levels of enforcement. The less productive the loser, the more constrained is the office holder and the better is enforcement and the economy’s outcome–with more secure property rights, more economic activity, and higher welfare. Easier access to the political arena for more people increases the likelihood of better outcomes while extending the franchise alone does not.
