Reputation Effects and Incumbency (Dis)Advantage

We study dynamic models of electoral accountability. Politicians’ policy preferences are their private information, so officeholders act to influence the electorate’s beliefs—ie, to build reputation—and improve their re-election prospects. The resulting behavior may be socially desirable (good reputation effects) or undesirable (bad reputation effects). When newly-elected officeholders face stronger reputation pressures than their established counterparts, good reputation effects give rise to incumbency disadvantage while bad reputation effects induce incumbency advantage, all else equal. We relate these results to empirical patterns on incumbency effects across democracies.

This paper concerns electoral accountability and incumbency effects. In democracies, voters delegate policy decisions to elected politicians. Such delegation poses challenges, however, as there is no formal contract governing what decisions an officeholder takes (there is moral hazard), and officeholders may have their own policy preferences that only they know (there is adverse selection). The primary instrument that voters can use to control officeholders—to hold them accountable for their actions—is the decision of re-election. We study how re-election concerns shape incumbents’ behavior and the consequences for voters’ retention decisions.