Political Competition in Economic Perspective

It is sometimes argued that political competition yields benefits to the citizens just as competition in economic markets yields benefits to consumers. We consider the economic costs and benefits of political competition and find that the story is somewhat more complicated. We first review the limited existing literature on this topic, and in the process, identify a number of distinct interpretations of what constitutes political competition. We then turn our attention to two forms of political competition based on what we refer to as accountability for incumbents and electoral politics. We find that, while political competition can yield allocative benefits for the public, it can also generate aggregate welfare costs by constricting the set of politically feasible public investments. Pranab Bardhan University of California at Berkeley [email protected] Tsung-Tao Yang University of California at Berkeley Political Competition in Economic Perspective by Pranab Bardhan and Tsung-Tao Yang University of California at Berkeley June 2004