Economics Seminar: Selcen Çakır (Boğaziçi University)

Abstract: The political power of elected representatives may be distorted during membership negotiations with parties. This is especially true in countries where party control over government functions generates club goods, which increases the value of party membership. As a result, politicians may relegate their political power to leaders when membership is more rewarding than acting independently. I develop an equilibrium model of party formation that incorporates parties' provision of club goods, rent sharing between politicians and party leaders, as well as politicians' outside options. I structurally estimate my model for Turkey with a unique dataset of 33 parties, 2,000 politicians who gained seats in parliament, and 35,000 politicians who were on party ballot lists between 1995 and 2014. My model matches the high level of party switching (28.5%) that is characteristic of many multi-party systems. I find that Turkish parties produce club goods more easily than they produce rents, which makes the party leaders ever more powerful. In counterfactual exercises, I compare power distributions in parties across different electoral systems. To do this, I categorize electoral systems according to (i) the mechanisms for producing political rents, and (ii) politicians' bargaining power during membership negotiations. I find that when parties produce rents as a team, even politicians with small leadership skills have an incentive to form a party and become big fishes in small ponds. This provides a novel explanation for the differences in party-size distribution across different systems.