Ulric B. and Evelyn L. Bray Seminar in Political Economy

We provide a positive analysis of effort allocation by a politician facing reelection when voters are uncertain about the politician s preferences on a divisive issue. We then use this framework to derive normative conclusions on the desirability of transparency, term limits, and independence of executive power. There is a pervasive incentive to posture by over-providing effort to pursue the divisive policy, even if all voters would strictly prefer to have a consensus policy implemented. As such, the desire of politicians to convince voters that their preferences are aligned with the majority can lead them to choose strictly pareto dominated effort allocations in the first period. Transparency over the politicians effort choices can either mitigate or re-enforce the distortions depending on the strength of politicians office motivation and the efficiency of institutions. When re-election concerns are paramount, and executive institutions are strong, transparency about effort choices can be bad for both incentivizing politicians and for sorting.