DP4272 Term Limits and Electoral Accountability

Author(s): Michael Smart , Daniel M Sturm

Publication Date: February 2004

Keyword(s): political agency , accountability , term limits

JEL(s): D72 , H11

Programme Areas: Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP4272.asp

This Paper analyses the impact of term limits in a political agency model. We find that term limits reduce the value of holding office. This reduction in the re-election incentive can induce politicians to implement policies that are closer to their own private preferences. Such ‘truthful’ behaviour by incumbents will in turn result in better screening of incumbents whose preferences do not correspond to voters’ preferences. We show that these effects can make a two-term limit, which is the empirically most frequent restriction on tenure, ex ante welfare-improving from the perspective of voters. We present evidence from gubernatorial elections that the model’s main empirical implication is supported by the data.