Corruption and bicameral reforms

California unicameral legislature, October 4 2006, Attorney General File number 2600-034; State of New York Bill 9875, February 5 2010.

As Madison (1788) had pointed out “...a senate, as a second branch of the legislative assembly, distinct from, and dividing the power with, a first, must be in all cases a salutary check on the government. It doubles the security to the people, by requiring the concurrence of two distinct bodies in schemes of usurpation or perfidy, where the ambition or corruption of one would otherwise be sufficient”.

According to the New York unicameral bill proposal “A one house legislature will eliminate needless duplication and delay (...); it will speed up the budget process and facilitate the adoption of timely budgets” (source: State of New York, Bill Number A597, January 18 2005).

Of course, bicameralism may also serve other purposes such as the representation of heterogenous interests that in modern democracies are associated with geographically distinct political jurisdictions such as for example, federal states. For a comprehensive view of bicameralism, see Tsebelis and Money (1997) and Voigt (2012). For an overview on the effects of federalism and bicameralism on corruption see instead Rose-Ackerman (2006).

For an overview of bicameral arrangements in national states and a cross-country empirical analysis on bicameralism and corruption, see Testa (2010).

For instance during the weeks preceding the approval of the 2005 New York state budget, it has been pointed out that “...winning on time passage from the legislature could be costly.... It might require Mr. Pataki to agree to hundreds of millions of dollars in extra spending” (The Calendar vs. the Purse for Albany’s Big 3 The New York Times, March 16 2005). For more details on late budget procedures in US federal states see Eckl (1998).

See Osborne and Rubinstein (1990) for a comprehensive survey, and Baron and Ferejohn (1989) for a pioneering application of extensive form bargaining models to the legislative process.

The literature on bicameral legislative bargaining typically does not incorporate elections. One exception is Muthoo and Shepsle (2008) which lay out a model of optimal constitutional choice introducing elections in a reduced form, i.e. without explicitly modeling the voting strategy.

The legacy motive represents a straightforward device to introduce non-pecuniary benefits enjoyed by politicians in power (Maskin and Tirole 2004). In a previous version of our paper (Facchini and Testa 2009), we had modeled the same idea by assuming that politicians derive instead a positive utility from implementing their own ideological agenda. While this allowed us to capture the role of political polarization, the main thrust of the analysis of bicameralism is not affected.

The recent corruption charges against Jack Abramoff, one of the most influential lobbyists in Washington, has sparkled a wide debate on the large amounts of resources spent to gain influence on law making. As the Washington Post (June 22, 2005) points out “...companies are also hiring well-placed lobbyists to go on the offensive and find ways to profit from the many tax breaks, loosened regulations and other government goodies that increasingly are available.” In fact, professional lobbyists are usually hired for the exclusive purpose of constantly approaching legislators to promote the interests of their clients.

Simple retrospective voting strategies also have the advantage of being plausible since they receive substantial empirical support (Fiorina 1981) and their adoption by the electorate can be thought of as the result of simple conventions due to social norms (Persson et al. 1997).

Note though that, as shown in the proof of Lemma 2, the alternative voting strategy \([\sigma '''(C^{H})=0,\sigma '''(C^{L})=1,\sigma '''({\mathbf {\varnothing }})=0]\) would deliver the same payoff for the voters.

This rule would have allowed a member country, that had been outvoted on a proposal in Parliament, to ask for a new vote in the Council. This would have been equivalent to a system where the first body (Parliament) has proposal power and the second (Council) has final decision power.

As pointed out in the literature (Persson et al. 1997) the advantage of a retrospective voting strategy conditioning on the last policy outcome is its simplicity. Moreover, in the context of our complex decision making process, it has the additional benefit of allowing the voter to hold multiple legislators accountable even if he does not punish or reward them differently when they undertake different actions.

See Lemmas 6 and 8 in the Appendix. Note that our simple voting strategy \(\sigma ^{*}\) conditions on the final policy outcome, rather than on the behavior of each individual chamber. Alternatively, one could consider a more complex voting strategy, which would make the re-election of a given legislator dependent on the specific action he has undertaken, rather than only on the final policy outcome. Note that—as argued in Remark 1 in the Appendix—this more complex voting strategy does not allow the voter to obtain accountability if it cannot be already reached using our simple voting strategy. For this reason we focus the analysis on our simple voting strategy, which has the additional advantage of requiring less information on the entire policy formation process on the side of the voter.

As for the equilibrium shares of profits, in the second period, if the legislator is the proposer, then \(\beta ^{2}_{g_1}=1\), if the lobby is the proposer then \(\beta ^{2}_{g_1}=\frac{C^H-\gamma (B+E)}{\pi }\). On the other hand, the second legislator, who cannot credibly us his veto in the second period, always gets \(\beta ^{2}_{g_2}=0\). Note that although the lobby’s outside option is worsened by the risk of binding time constraints, still the lobby always prefers agreement to disagreement. For this reason \(\gamma \) does not affect the share of profits paid to the lobby when \(g_1\) is the proposer. See also the proof of Lemma 3 in the Appendix.

The asymmetry between the two chambers depends on the allocation of proposal powers, which in our setup lies with the first legislator. In an alternative setting, in which in the second period \(g_1\) retains proposal power only with probability p, then the minimum shares of rent required by the two legislators to choose the high cost policy in \(t=1\) are \(\hat{\beta }_{g_1}^1=\overline{\beta }^1_{g_1}-\delta (1-p)\{q+(1-q)\frac{C^H-\gamma (B+E)}{\pi }\}\) and \(\hat{\beta }_{g_{2}}^{1}=\overline{\beta }^1_{g_2}+\delta (1-p)[q+(1-q)\frac{C^H-\gamma (B+E)}{\pi }]\) (see Lemma 6 in the Appendix). As we can immediately see, \(\hat{\beta }_{g_1}^1 \le \overline{\beta }^1_{g_1}\), whereas \(\hat{\beta }_{g_{2}}^{1} \ge \overline{\beta }^1_{g_2}\), i.e. if both chambers retain some proposal power in the second period, the difference in the minimum profit share they require to pass the high cost policy declines. We would like to thank a referee for suggesting this extension.

Note that if there is uncertainty in the allocation of proposal power in the second period—see footnote 19—the second chamber can extract a larger rent, and thus the scenario in which bicameralism decreases accountability is less likely.

Expressing the difficulty of buying legislators.

This type of arrangement is very common. For instance, in the US only the House of Representatives can initiate budget legislation.

Remember that in the second period the high cost policy will always be chosen. As for the profit shares, in \(t=2\), if amendment rights are restricted, the equilibrium profit shares are \(\beta _{g_{d}}^{2}=q+(1-q)\frac{C^H}{\pi }\) for all \(g_d\), with \(\sum _{d=1}^2 \beta _{g_{d}}^{2} \le 1\). If amendment rights are instead unrestricted, \(\beta _{g_{1}}^{2}=0\), whereas \(\beta _{g_{2}}^{2}=q+(1-q)\frac{C^H}{\pi }\). See proof in Appendix.

See for instance Tsebelis and Money (1997).

In most countries, this means that the text of a bill needs to be approved in the same form by both legislative bodies. Hence, in case of disagreement, the bill shuttles between the two chambers until an agreement is reached. However, in extreme cases of complete parliamentary deadlock, other mechanisms have been devised. For instance, in the US a conference committee can be called where delegates from each chamber meet to find a compromise. For more details see Tsebelis and Money (1997).