How can economic policy-making be made more inclusive and thereby support long-term, broad-based growth? This column argues that fostering inclusive economic policy starts with the political process: more inclusive electoral design.
People respond to incentives, and politicians are no different. The way that elections are designed can drive the platform and policies of a candidate just as much as any other factor. Through these platforms, politicians tailor how and whether they appeal to different groups of voters.
Economists talk about the integral role of ‘inclusive institutions’ – those that encourage broad political participation – in governance and long-term growth. But what does this mean in practice? How do we create inclusive institutions?
The central argument here is that electoral design is a key component in creating inclusive institutions and, by extension, economic development. When elections encourage elected representatives to represent a broad group of voters rather than a specific narrow group of voters, politicians then have incentives to provide public goods that benefit a broader constituency once in office.
Electoral rules shape political incentives
One aspect of electoral design directly links political strategy to representation: electoral rules. Electoral rules define how what voters want is translated into political representation. These formulas can create incentives for politicians to appeal to broader constituencies.
How exactly does this work?
Compare single-round and two-round systems. In a single-round system, voters vote once and the candidate with the most votes wins. In a two-round system, voters first vote and if no candidate receives a majority, they vote a second time between the top two candidates.
This distinction means that to win in a two-round system, candidates not only have to obtain the most votes (which could be as little as, say, 30% in a single-round system) but they must also obtain at least 50%. The intuition is that for a politician, every vote is more valuable and it becomes costly to ignore certain groups of voters. In order to win, candidates must adopt strategies to appeal to broader groups of voters.
This logic can be applied to other electoral rules, such as proportional systems and the electoral college. For example, the electoral college works against encouraging majority representation: candidates can win with only 25% of the vote (by winning 50% of the vote in 50% of districts).
Case study: single- and two-round systems in Brazil
A variety of electoral rules are used around the world to select political representatives. For executive positions in presidential systems, these generally fall under two systems: single-round and two-round systems.
My research studies the implications of single-round and two-round systems in Brazilian municipal elections. Brazil employs a unique rule, where municipalities below 200,000 registered voters elect their mayor in a single-round election, and where municipalities above this threshold elect their mayor in a two-round election.
Do politicians in two-round elections represent broader groups of voters? First round vote counts at each polling station indicate that voters in two-round municipalities are less geographically concentrated (see Figure 1). This decrease only occurs among the top two candidates: whoever wins ultimately represents a geographically broader constituency.
Figure 1: Overall concentration of voters for specific candidates, as measured by the coefficient of variation index
Two-round elections foster inclusiveness along another dimension: voters are more engaged in the political process and cast significantly fewer blank and invalid ballots.
But electoral design is not a useful policy tool for economic development if this does not lead to differences in economic policy. In Brazil, it appears that these differences during the election do translate into policy: once in office, politicians elected in two-round elections provide more resources to public schools (see Figure 2) and distribute these resources more equitably across schools. This lower inequality is driven by additional resources going to the poorest schools in the municipality.
Figure 2: Levels of school equipment resources, as measured by a school’s national percentile rank in resource levels
But are politicians simply pandering to groups of voters in inconsequential ways? The evidence suggests not. Two-round municipalities also experience improved educational outcomes: dropout rates are lower and literacy rates higher among cohorts who were of school age during the electoral term.
How do we move forward with this?
Politicians have ideologies, but they also respond to incentives. Thoughtful design of elections can make the political system, and subsequent economic policy, more inclusive by generating incentives for politicians to appeal to broader groups of voters.
Two-round systems can lead to more inclusive representation. Other voting rules that approximate requiring majorities to win may lead to similar results, such as ranked-choice voting.
But transforming the political system requires huge political will. In the face of political constraints, countries should not disregard smaller, incremental policy changes. Policy tools that make it more difficult for politicians to win with narrow groups of voters – such as ones that reduce personality politics or limit the number of candidates in single-round elections – can generate meaningful steps towards making the political process more inclusive.
Moya Chin is an economist at the International Monetary Fund. She received her PhD in Economics from Harvard University.
This article relates to work that Moya Chin undertook while at Harvard University. The views expressed are solely those of the author and should not be represented as those of the International Monetary Fund, its Management, or Executive Board.