Designing Democratic Institutions: Endogenous Seniority

1. Designing Democratic Institutions:Endogenous Seniority Kenneth A. Shepsle Roundtable RemarksLSEMay 13, 2008

2. Introduction • imposed--institutional designers • chosen -- institutional players

3. Ubiquity of Seniority • Legislatures • Age grading • LIFO union contracts • PAYG pensions • Academic & bureaucratic grade-and-step systems

4. Previous Modeling Approaches • Binmore’s Mother-Daughter game • Hammond’s Charity game • Cremer and Shepsle-Nalebuff on ongoing cooperation

5. Modeling Choice of Institutions • Legislators choose a seniority system • Tribes choose ceremonies and rights-of-passage between age-grades • Unions and management negotiate last-in-first-out hiring/firing rules • Social security and pension policies are political choices • Grade-and-step civil service and academic schemes are arranged

6. McKelvey-Riezman • A legislator is senior if he or she was a legislator in the previous term and was reelected • Legislative game: Baron-Ferejohn divide-the-dollar • Seniority system choice • if yes, then seniors have higher initial recognition probabilities • if no, the recognition probability is 1/n for all legislators • Voters maximize portion of the dollar • Legislators care only about perks of office

7. McKelvey-Riezman • Time Line • Decision on seniority system • Divide-the-dollar game • Election • Main Result • At Stage 1, incumbents will always select a seniority system • In equilibrium it will have no impact on Stage 2 • Because in Stage 3 it will induce voters to re-elect incumbents

8. Muthoo-Shepsle Extension • Seniority still categorical • But the cut-off criterion is an endogenous choice • Mechanism for cut-off choice • At stage 1 each legislator announces a cut-off • The median announcement is the cut-off • Median of zero – no seniority system

9. Muthoo-Shepsle Extension • Result • Cut-off criterion determined by distribution of previous terms of service • Under specified conditions the legislator with the median number of previous terms served will be pivotal • She will set the cut-off criterion at her seniority level • Selected categorical seniority system: most junior senior legislator has median number of previous terms of service

10. Muthoo-Shepsle Extension Open Question Under what conditions will a fully ordinal seniority system emerge? Watch this space

11. THANK YOU!