Institutional arrangements influence the type of policies that leaders pursue. We examine two institutional variables: size of the selectorate (S) – the set of people who have an institutional say in choosing leaders – and the size of the winning coalition (W) – the minimal set of people whose support the incumbent needs in order to remain in power. The larger the winning coalition, the greater the emphasis leaders place on effective public policy. When W is small, leaders focus on providing private goods to their small group of supporters at the expense of the provision of public goods. The size of the selectorate influences how hard leaders work on behalf of their supporters. The greater the size of the selectorate, the more current supporters fear exclusion from future coalitions. This induces a norm of loyalty that enables leaders to reduce their effort and still survive. As a first step towards a theory of endogenous selection of institutions, we characterize the institutional preferences of the different segments of society based on the consequences of these institutions for individual welfare. We conclude by examining the implication of the model for the tenure of leaders, public policy, economic growth, corruption, taxation and ethnic politics.
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