A POLITICAL THEORY OF POPULISM*

When voters fear that politicians may be influenced or corrupted by the rich elite, signals of integrity are valuable. As a consequence, an honest polit-ician seeking reelection chooses ‘‘populist’ ’ policies—that is, policies to the left of the median voter—as a way of signaling that he is not beholden to the interests of the right. Politicians that are influenced by right-wing special interests re-spond by choosing moderate or even left-of-center policies. This populist bias of policy is greater when the value of remaining in office is higher for the polit-ician; when there is greater polarization between the policy preferences of the median voter and right-wing special interests; when politicians are perceived as more likely to be corrupt; when there is an intermediate amount of noise in the information that voters receive; when politicians are more forward-looking; and when there is greater uncertainty about the type of the incumbent. We also show that soft term limits may exacerbate, rather than reduce, the populist bias of policies. JEL Codes: D71, D74. I