Three essays in political economy

This dissertation consists of three essays in political economy. In Chapter 1, we analyze the inefficiency that may arise in the form of reverse discrimination in the presence of favoritism or nepotism. Favoritism is typically associated with inefficient transfers to the core support of the incumbent government. But inefficiency opposite in nature may also arise through the electoral process in a political environment where favoritism is pervasive. We show that if the policy maker is sufficiently office seeking, a socially efficient action may never be taken if it yields benefits to his core support due to reputational concerns. Hence, the core support of the incumbent may fare worse than other groups. We also consider the implications of policies such as anti-nepotism laws or term limits in the presence of favoritism. In Chapter 2, we model endogenous party membership and party platforms when party activists have different policy preferences and different priorities. In our model, party activists are heterogeneous not only in their ideal policy but also in their intensity to pursue policy issues vis-a-vis the spoils from office. We provide existence and characterization results for an equilibrium in which party activists choose their party affiliation with correct anticipation of the choices by others, and the resulting party platforms are consistent with the affiliation choice. This model offers an explanation for the overlaps in ideology between political parties. It also provides insights into the inner composition of political parties with different sizes. In Chapter 3, we analyze the voting behavior of partisan voters in a two-party presidential system when voters care about candidates\u27 valence characteristics as well as policy issues. We show that since the president has a larger influence over policy than a single representative, partisan voters are more likely to vote for their own party\u27s candidate in the presidential election than in the legislative election. We also show that partisan voters are more likely to vote for their own party\u27s candidate in legislative elections when the incumbent president is from the opponent party, than when he is from their own party. We provide some evidence that supports these findings