The Declining Talent Pool of Government

We consider a government for which success requires high performance by talented ministers. A leader provides incentives to her ministers by firing those who fail. However, the consequent turnover drains a finite talent pool of potential appointees. The severity of the optimal firing rule and ministerial performances decline over time: the lifetime of an effective government is limited. We relate this lifetime to various factors, including external shocks, the replenishment of the talent pool, and the leader's reputation. Some results are surprising: an increase in the stability of government and the exogenous imposition of stricter performance standards can both shorten the era of effective government, and an increase in the replenishment of the talent pool can reduce incumbent ministers' performance.     

The Three As of Government Formation: Appointment,Allocation, and Assignment

How does the Prime Minister organize her government so that she can implement her policy agenda? In our model, a Prime Minister appoints individuals to her cabinet, allocates their portfolios, and assigns their policy tasks—that is, she decides the relevant jurisdiction of departments and the type of proposals a minister can make. Upon appointment, ministers obtain expertise on policies specific to their jurisdiction and strategically communicate this information to the Prime Minister before a policy is implemented. Assignment allows the Prime Minister to implement her agenda even when she is constrained to appoint ministers whose policy preferences are far from her own. A Prime Minister weakly prefers a diverse cabinet. In equilibrium, the Prime Minister is indifferent between delegating policy or implementing policy herself.     

In Defense of Factions

We model faction formation in a world where party politicians' objective is the development of an informed program of governance. Politicians' preferences reflect their own views and their information that, when aggregated via intraparty deliberations, influences the party manifesto. By joining a faction, a politician increases the influence of its leader on the manifesto, but foregoes his individual bargaining power. For broad model specifications, we find that a faction formation process allows power to be transferred to moderate politicians. This facilitates information sharing, increasing the capacity of the party to attain its objective. These positive welfare effects may hold even when factionalism restricts intraparty dialogue, and hold a fortiori when information is freely exchanged across factions. We conclude that the existence of ideological factions may benefit a party: It provides a means to tie uninformed or extremist politicians to more moderate and informed faction leaders.