We introduce tax contracts and examine how they affect government formation and welfare of voters in a democracy with proportional elections. A tax contract specifies a range of tax rates a party is committed to if in government. We develop a new model of party competition in which parties...

When politicians are provided with insufficient incentives by the democratic election mechanism, we show that social welfare can be improved by threshold contracts. A threshold incentive contract stipulates a performance level which a politican must reach in order to have the right to stand for...

We consider an in nitely repeated reappointment game in a principal- agent relationship. Typical examples are voter-politician or government- public servant relationships. The agent chooses costly effort and enjoys being in office until he is deselected. The principal observes a noisy signal of...

When politicians are provided with insufficient incentives by the democratic election mechanism, we show that social welfare can be improved by threshold contracts. A threshold incentive contract stipulates a performance level which a politician must reach in order to have the right to stand for...