Evidence on the political principal-agent problem from voting on public finance for concert halls

Niklas Potrafke

Principal-agent problems can arise when preferences of voters are not aligned with preferences of political representatives. Often the consequence of the political principalagent problem is political catering to special interests. In this paper I provide examples of principal-agent problems regarding public spending. The examples concern construction or extension of concert halls in two German cities. Resistance to public funding for the concert halls was particularly strong in electoral districts with large constituencies on the left. The evidence indicates that political representatives were more bourgeois than their constituencies. In the cases studied asymmetric information did not prevail and voters were able to discipline their representatives through referenda that countered the results of voting by political representatives.

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Year of publication:	2013
Authors:	Potrafke, Niklas
Publisher:	Munich : ifo Inst.
Subject:	Principal-agent problem \| referendum \| direct democracy \| political representation \| political ideology \| cultural policy \| Prinzipal-Agent-Theorie \| Agency theory \| Referendum \| Demokratie \| Democracy \| Ideologie \| Ideology \| Wahlverhalten \| Voting behaviour \| Kulturpolitik \| Cultural policy \| Ökonomische Theorie der Demokratie \| Economic theory of democracy