Term limits and bounds on policy responsiveness in dynamic elections

I analyze equilibria in an infinite-horizon model of elections with a twoperiod term limit in the presence of adverse selection and moral hazard. The focus is on responsiveness of policy choices of first-term politicians. In equilibrium, office holders’ policy choices are ordered by type; politicians exert positive effort in the first term of office; and as politicians become highly office motivated, the highest politician type mixes with positive probability over arbitrarily high policies. Nevertheless, the commitment problem of voters imposes a strict bound on equilibrium effort exerted by politicians that holds uniformly across of the level of office benefit and the rate of time discounting. In addition, I prove existence of equilibrium, pointing out and correcting an error in the proof of Banks and Sundaram (1998).