Extremist parties and corruption

Abstract

We study rent-seeking behaviour of political parties in a proportional representation system, assuming that the final policy choice of the parliament is a weighted average of parties' policy positions, weights being their vote shares. We find that the parties' policy preferences and their rent levels are strongly linked. More clearly, our most interesting result is that the more a party is extremist, the higher her rent level. The intuition behind this result is quite clear: an extreme party has more policy influence than a moderate party since she pulls the final policy towards her position more than others. Hence, a voter is ready to pay more rents to an extreme party in exchange of a higher policy influence. Furthermore, note that the voter does not need to be an extremist to vote for an extreme party. He is acting strategically in order to influence the final policy in his advantage as much as possible. In turn, this strategic behaviour of voters let more extreme parties to earn higher rent levels.