Competence and Ideology

We develop a dynamic, 2-party citizen-candidate model in which candidates are distinguished by both their ideology and their valence. We provide sufficient conditions under which (i) the median voter is decisive and (ii) there exists a unique symmetric, stage-undominated, stationary perfect Bayesian equilibrium. In our dynamic setting, reputational concerns endogenize incentives to compromise. In equilibrium, we prove that higher valence incumbents compromise more, compromise to more extreme policies, and are re-elected more. We find that the correlation between valence and extremism varies across different cohorts: the correlation is negative for first-term representatives, but positive in the long-run stationary distribution of office-holders (large congress). This novel result might partially explain the conflicting findings in the empirical literature and theoretical single-election models. We then find that a FOSD improvement in the distribution of valences benefits all voters. More heterogeneity in valence benefits the median voter, but may hurt a majority of voters when voters are sufficiently risk averse. We expand the model to allow interest groups to invest in candidate valence and provide conditions under which the equilibrium expected policy choice of office holders is more extreme when interest groups have more extreme ideologies, reducing welfare of all voters. JEL classification: D72.