Electoral Strategy and Economic Policy

This paper develops an approach to political equilibrium in a two-party setting. The approach characterizes political resource allocationas trading o¤ the utility of core party supporters and swing voters,i.e. those who are not attached to either party. The model has threestages. First parties determine their electoral strategies. Second, anelection is held. Third, policy is chosen. To illustrate the model atwork, I apply it to two policy settings - the standard spatial modeland the distributive politics problem of targeting transfers to groupsof voters. The latter application is particularly interesting since thegame of electoral strategy that emerges is supermodular. The paperthen briefly discusses strategies for making political equilibria cred-ible, how some of the key magnitudes suggested by the theory canbe measured and the additional considerations that arise in dynamicmodels of political competition.[...]