Persistent rent extraction

Abstract

Representative democracy does not necessarily eliminate political corruption. Existing models explain the survival of rent-taking politicians by ideological divisions in the electorate and/or informational asymmetries. The current paper demonstrate that rent extraction can persist even if voters are fully informed and ideologically homogenous. We show that in such an environment, voters may gain by persistently reelecting a rent-taker that limits his rent extraction. Such an equilibrium occurs when voters and politicians do not discount the future too heavily, and the share of honest candidates is relatively small.