Term Limits and Bargaining Power in Electoral Competition
- American Economic Journal: Microeconomics (Forthcoming)
I study a dynamic model of electoral competition between candidates with
heterogeneous valence. When the candidates' and voters' policy preferences
differ, the winner extracts rents, limited only by the voters' threat of electing
the weaker candidate. This threat becomes more costly to the voters when
the relevant time horizon is longer. Thus, term limits can increase the voters'
bargaining power and their welfare. Term limits are even more important for
curbing rent extraction if entry is strategic, as in that case strong incumbents
face weaker competition. The paper also compares the welfare properties of
seniority caps and stochastic term limits.
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