Endogenous Limits on Proposal Power

This paper presents a dynamic model of election, government formation, and legislation in a parliamentary democracy with proportional representation in which the policy chosen in one period becomes the status quo for the next period. The electorate votes strategically by taking into account the likely governments that parties would form and the policies they would choose as a function of the status quo. The status quo thus affects both the election outcomes and the bargaining power of the parties during government formation. A formateur party thus has incentives to strategically position the current policy to gain an advantage in both the next election and the subsequent bargaining over government formation and policy choice. These incentives can give rise to centrifugal forces that result in policies that are outside the Pareto set of the parties.