Separation of powers with ideological parties

Separation of powers with checks and balances (SP) is usually regarded as a key institution complementing elections in the control of elected officials. However, some analysts and many politicians also warn that excessive checks on the executive in the presence of polarization may lead to political inaction. We analyze the interaction between elections and SP, and study under what circumstances they complement each other. We first introduce a political agency model with ideological parties where citizens and politicians care about rents (a valence issue) and policy (a positional issue). Then, we analyze the impact of SP on the effectiveness of elections to discipline and select politicians. We demonstrate that SP unambiguously raises a majority of voters’ welfare in highly polarized non-competitive political environments, because it strengthens both discipline and selection without causing political gridlock. SP also raises voters’ welfare if elections are very effective at disciplining first period incumbents. Nevertheless, SP may reduce voters’ welfare if most rents go undetected and reform is not a first-order issue.