Checks and Balances and Vote Buying in Legislatures

• In Event: Money and Special Interest Influence in Politics

Abstract

Why do checks and balances work well in some cases, but not in others? This paper studies the conditions under which a system of checks and balances may be expected to be beneficial to a society, resulting in more equitable policies and less corruption. In particular, our analysis highlights the idea that the conflict between social groups may generate incentives for vote-buying in legislatures. Our theoretical analysis is preceded and motivated by a study of the "mensalão" scandal in Brazil.

Our model combines a legislative bargaining game in the style of Baron and Ferejohn (1989) and Persson, Roland and Tabellini (2000), with a retrospective voting model à la Barro (1973) and Ferejohn (1986). The notion of a system of checks and balances is captured by the simple requirement that the agenda-setter's proposal be approved by the other legislator in order to be implemented; otherwise, the status quo is kept in place.

The model is solved for a stationary subgame perfect Nash equilibrium and we use as benchmark the equilibrium obtained from a model without checks and balances, where the agenda-setter is able to implement any policy without the need for legislative approval. The analysis yields the surprising result that, under certain conditions, checks and balances may lead to an increase in the amount of political rents extracted by legislators. In other words, checks and balances may actually exacerbate the problem of corruption.

Author

• Marcos Yamada Nakaguma, Sao Paulo School of Economics - FGV