Pandering and Pork-Barrel Politics

PanderingandPork-BarrelPolitics󰀄

EricMaskinyJeanTirolez

July23,2014

Abstract

Wedevelopamodelofpork-barrelpoliticsinwhichagovernmento¢cialtriestoimproveherre-electionchancesbyspendingontargetedinterestgroups.Thespendingsignalsthatshesharestheirconcerns.Weinvestigatethee¤ectofsuchpanderingonthepublicde…cit.Panderingmakesthede…citworseifeithertheo¢cial’soverallspendingpropensityisknown,orifitisunknownbutthee¤ectofspendingonthede…citissu¢cientlyopaquetovoters.Bycontrast,anunknownspendingpropensitymayinducetheo¢cialtoexhibit…scaldisciplineifthereisenoughde…cittransparency.

Keywords:Accountability,pandering,de…citbias,redistributivepolitics,budgetcaps.JELnumbers:H1,H7,K4.

󰀂WearegratefultoTimBesley,MathiasDewatripontandSteveTadelisforhelpfulcomments.TheNSFandtheRilinFund(EricMaskin)andtheEuropeanResearchCouncil(EuropeanCommunity’sSeventhFrameworkProgramme(FP7/2007-2013)GrantAgreementno.249429)(JeanTirole)providedresearchsupport.yHarvardUniversityandHigherSchoolofEconomics,Moscow.HarvardUniversity,LittauerCenter,1805CambridgeStreet,Cambridge,MA02138;tel:617-495-1746;email:emaskin@fas.harvard.eduzToulouseSchoolofEconomics(TSE)andInstituteforAdvancedStudyinToulouse(IAST);ManufacturedesTabacs,21alleedeBrienne,Fr31015Toulousecedex6;tel.:+33-(0)561128642;email:jean.tirole@tse-fr.eu

11Introduction

Inarepresentativedemocracy,agovernmentisusuallyelectedbyacoalitionofminorities

whoexpectittopressfortheirinterests.Thisprovidesthegovernmentwiththeincentive

todemonstrateitscongruencewiththoseinterests.Indeed,observationsuggeststhat

publico¢cialsandtheirsta¤sspendsubstantialtime,energy,andresources…guringout

howtoappearsympathetictotheconcernsofinterestgroups,abehaviornotaccounted

forbyexistingtheories.

Thispaperdevelopsaframeworkforstudyingpork-barrelspendingthatsignalsa

government’sconcernforitsconstituents.Wesupposethattheelectorateisuncertain

aboutapublico¢cial’spreferencesoverinterestgroups.Avoter–atleastonewhosevote

ismotivatedbyhisprivateinterests–wouldliketore-electtheo¢cialifsheappearsto

putsu¢cientweightonhisconcerns.Thisprovidesherwithincentivetodirectbene…ts

tohim(i.e.,toconductpork-barrelspending).Inessence,shewouldliketotellthevoter:

“Icareaboutyou.”

Weshowthatthisincentivetendstogeneratetoomuchpublicspending,butthatthere

arethreequali…cationstothisresult.First,theveryine¢ciencyofpork–thefactthat

theelectorateoveralltypicallylosesmorefromitthanthetargetedinterestgroupsgain

–placessomerestraintontheo¢cial.Second,iftheo¢cial’soverallspendingpropensity

isunknownandatleastaportionofpublicspendingmustappearonthepublicbalance

sheet,ahighspendinglevelwillbeperceivedasabadsignalbytheelectorate.Thus,

theo¢cialwillbetornbetweenherdesiretopleaseinterestgroupsandherawareness

thattoomuchspendingcanback…re.Wecharacterizetheconditionsunderwhichthe

disclosureof…scalde…citscanactuallyleadtolowpublicspending.Third,limitson…scal

de…citsaresometimeslegallyimposed,aswiththeStabilityandGrowthPactinEurope

orbalancedbudgetrequirementsinU.S.states.Evenso,weshowthattheycanhave

unfortunatesidee¤ectsbecauseof“crowdingout”and“timeshifting”.Speci…cally,de…cit

capsinducetheo¢cialtocutdownnotonlyonporkbutonusefulpublicspending.Such

capsalsointroduceabiastowardhigh-costprojectsthatfrontloadbene…tsandbackload

expenditure.

Thepaperisorganizedasfollows.Section2laysoutthebasicmodel.Section3as-

sumesthatthepublico¢cial’sspendingpropensityisknown:thereisuncertaintyabout

thestructureofherpreferences(whichinterestgroupssheprefers),butnotaboutthe

totalspendingshewouldliketodo.Thissectionshowshow,intheabsenceofabudget

cap,pork-barrelpoliticsleadstooverspending.Section4thenconsiderstheimpactofa

2constitutionallimitonbudgetde…cits.Section5introducesuncertaintyabouttheo¢-

cial’sdesiredspendinglevel,andexamineshowthedegreeofbudgettransparencya¤ects

overallspending.Section6o¤ersabriefsummaryandafewideasforfurtherwork.

Relationshiptotheliterature

Althoughwebelieveourmodelo¤ersanewperspectiveonpork-barrelpolitics,itis,

ofcourse,relatedtovariousstrandsoftheexistingliterature.Ourexcessive-spending

resultsareconnectedtothebroaderliteratureonde…citbias.1Muchofthatliterature

assumesthatinterestgroupsimposeanexternalityonotherparties;thatis,theirspending

ispartially…nancedbytheseotherentities.Sometimestheseotherpartiesarefuture

votersorgovernments(PerssonandSvensson1989;AlesinaandTabellini1990;Aghion

andBolton1990);2sometimestheyareothersubgovernmentsunder…scalfederalism(as

inArgentinaorBrazil),andsometimestheyarecurrentinterestgroups(Velasco2000;

BattagliniandCoate2007a,b).IntheBattaglini-Coatemodels,thelegislaturechooses

spendingonpublicgoodsaswellasondistrict-targetedpork.Themodelsshowthat

forcingthelegislaturetobalanceitsbudget(or,moregenerally,constrainingitsability

tosmoothshocksbyissuingdebt)increaseswelfarewhenthecountry’staxbaseislarge

(relativetopublicspendingneeds),butnotwhenitissmall3.

Thecentralfeaturethatourmodeladdstothisliteratureissignalingtointerestgroups.

Speci…cally,incontrastwiththeearlierwork,weemphasizethepanderingcomponentof

pork-barrelspending,aswellthee¤ectsofde…cittransparencyandopaqueness.

Intheliteratureon“Ramseyelectoralpromises,”campaigningpoliticiansmakebind-

ingpromisestovariousinterestgroupssubjecttoanoverallbudgetconstraint(Dixitand

Londregan1996,1998;LindbeckandWeibull1987;Myerson1993)or,moregenerally,

subjecttotherequirementthatdebtbeissuedto…nanceabudgetde…cit(Lizzeri1999).

Thesetheoriestooinvolveanexternality,exceptthatitismediatedbyagovernment

1ArecentreviewofthisliteratureandanassessmentofitsrelevancecanbefoundinCalmfors(2005).2Martimort(2001)revisitsthePersson-Svensson-Alesina-Tabellinimodel(PerssonandSvensson1989;AlesinaandTabellini1990)ofthecommitmentvalueofbudgetde…citsfromthestandpointofredistrib-ution(Mirrlees1971).Hesupposesthatgovernmentsareinequalityaverse(left-winggovernmentsmoresothanright-wingones).Heshowshowaleft-winggovernmentisbothhurtbyabudgetde…cit(thefuturemarginalutilityofincomeincreases)andhelpedbyit(aright-winggovernmenttomorrowwillbeconstrainedtoadoptamoreredistributivepolicy).Onehistoricalcauseofde…citbias,dynamicallyinconsistentmonetarypolicy,hasbecomelessimportantinrecentyearswiththegrowthofindependentcentralbanks,whichbyandlargehaverefrainedfromusingin‡ationsurprisesto…nance…scalde…cits.3DrazenandIlzetzkiz(2013)emphasizeadi¤erentcostofattemptstoconstrainthedistributionofpork.Intheirmodel,theagendasetterhasprivateinformationaboutthevalueofapublicgood;porkactsasasignallingdeviceandgreasesthelegislativewheels.

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