Essays on voting, policy and campaigning

Abstract

This thesis deals with ‘voting, policy and campaigning’, comprising two related essays.  The first essay attempts to examine the theoretical relationship between probabilistic voting and policy, and the second focuses on the empirical relationship between voting and campaigning.

Tax policy in democratic societies can best be understood as the equilibrium outcome of a political process that trades off economic and political forces within a given set of institutions. The essential facts of observed tax systems can be seen as the outcome of optimising economic and political behaviours. In addition, tax policy tends to be misperceived and underestimated by voters, known as tax illusion. Among available models, the probabilistic voting or expected vote maximisation model appears well suited to deal with tax structure in a democratic setting. The probabilistic voting is a theory of electoral competition in which political parties or politicians offer policy platforms to the voters, and vote-maximising candidates are uncertain about the mapping from policy to aggregate voting behaviour. Application of the probabilistic voting model to tax policy has been a topic of interest in taxation theory.  In particular, this has provided us with valuable insight into the nature of positive tax structure.

We attempt to apply the probabilistic voting framework to policy combined with policy illusion, and to characterise the outcome of the political equilibrium policy structure. In the first essay, we choose different policy variables in each chapter. In chapter 2, we analyse a general tax policy combined with tax illusion, while, in chapter 3, we examine an excise tax policy. These two chapters focus on analysing the political equilibrium tax structure and political costs from taxation. Meanwhile, in chapter 4, we extend the model to include two distinct policy variables based on the policy visibility. Tax policy is direct and visible, but benefit policy is hidden and less visible and thus often misperceived by voters.  We then analyse the effect of misperceived benefit policy on visible tax policy making using a probabilistic linkage.

The probabilistic voting framework assumes that candidates are uncertain about the voting behaviour of voters, and voters also have rational ignorance or policy illusion.  However, candidates are willing to provide information related to their policy and nonpolicy attributes. Specifically, in election competition with campaign advertising, candidates engage in the campaign advertising to provide information on their policy positions or on their personal quality in an attempt to attract votes. In chapter 5, we use an empirical method to estimate the effect of electoral campaign advertising expenditures and candidate’s incumbency on votes gained in the election. Finally, in chapter 6, we adopt a signalling model to examine the relationship between campaign spending and quality signalling, and thus provide a theoretical explanation for the empirical results.

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