Markov Voting Equilibria : Theory and Applications ∗

We provide a general framework for the analysis of dynamics of institutional change (e.g., democratization, extension of political rights or repression), and how this dynamics interacts with (anticipated and unanticipated) changes in the distribution of political power and changes in economic structure (e.g., social mobility or other changes affecting individuals’preferences over different types of economic policies and allocations). We focus on the Markov voting equilibria, which require that economic and political changes should take place if there exists a subset of players with the power to implement such changes and who will obtain higher expected continuation utility by doing so. Under the assumption that different economic and social institutions/policies as well as individual types can be ordered, and preferences and the distribution of political power satisfy “single crossing” condition, we prove the existence of pure-strategy equilibrium and provide conditions for its uniqueness. Despite its generality, we show that the framework yields a number of comparative static results. For example, we show that if there is a change from one environment to another (with different economic payoffs and distribution of political power) but the two environments coincide up to a certain state s′ and before the change the steady state of equilibrium was that some state x ≤ s′, then the new steady state that emerges after the change in environment can be no smaller than x. We also show how this framework can be applied to the study of the dynamics of political rights and repression, and derive a range of additional comparative statics for this more specific application. Very Preliminary and Incomplete. Please Do Not Circulate.