Politics of consensus and compromise

What determines variations in legislative productivity? Why are some legislatures able to generate signiÖcant policy output while others appear mired in political gridlocks? Passing new laws is a defining task of governments and an important way in which elected offcials ináuence policy; asking what factors affect the size and quality of legislative output is therefore relevant for the study of democratic decision-making more broadly. In this paper, we investigate how coalition building in legislatures affects policy output. We model a divided legislature in which two parties -or factions- need to compromise in order to approve new laws. Each party decides whether to exert a high or a low e§ort in proposing a bill, and whether to accept or veto the proposal of the opponent party. Higher e§ort, while costly, translates in better bill proposal. Beyond the quality of legislation, parties care about votersípreferences. Such electoral incentives affect actorsíwillingness to propose new bills and to compromise on opponentsíproposals. The payoff from approving the other playerís proposal can be explained with the level of political sophistication, or human capital, of the electoral base. When a partyís voters have the ability to understand the quality of the bills proposed, the probability of having good bills approved increases. If the electorate of one of the two parties has a high degree of human capital, the other party has incentives to exert a positive effort knowing that, by refusing to approve the bill, the other player would be punished by voters. Indeed, when this is true for both parties and cost of efforts are small, we observe an equilibrium in which parties exert positive e§orts and high quality bills are approved. In contrast, if voters attach strong preference to a rejection, the result can be a political gridlock.