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This paper studies the effects of endogenous party formation on political platforms. It develops a model in which parties allow like-minded citizens to, first, share the cost of running in a public election and, second, coordinate on a policy platform. The paper characterizes the set of political equilibria with two competing parties and with one uncontested party. In two-party equilibria, the distance between both platforms is always positive but limited, in contrast to the median voter model and the citizen candidate model. In one-party equilibria, the median voter can be worse off than in all equilibria with two competing parties.

The paper studies political competition between endogenously formed parties instead of independent candidates. Party formation allows policy-motivated citizens to nominate one of their fellow party members as their candidate for a general election and to share the cost of running in this election. Thus, like-minded citizens are able to coordinate their political behavior in order to improve the policy outcome. The paper focuses on political equilibria with two active parties, and investigates the properties of stable parties and the policy platforms offered in equilibrium. The platforms of both parties can neither be fully convergent as in the median voter model (Downs 1957) nor extremely polarized as in the citizen candidate model (Besley & Coate 1997). In the benchmark case of full electoral certainty, a unique political equilibrium with positive platform distance exists. Endogenous party formation thus eliminates a major weakness of the citizen candidate model, the extreme multiplicity of equilibria. The model remains tractable, and the qualitative results are shown to be robust under the assumption of electoral uncertainty, where vote results cannot be perfectly predicted.

This thesis consists of three self-contained chapters. The first chapter studies political competition with endogenously formed political parties. Party formation allows policy-motivated citizens to coordinate their political behavior, and crucially affects political outcomes. In political equilibria with two active parties, both platforms can neither be fully convergent as in the median voter model, nor extremely polarized as in the citizen candidate model. The second chapter investigates the effects of political institutions on the quality of political selection, i.e., the voters' capacity to empower competent politicians. Political institutions that increase the concentration of political power in the hands of the election winner involve a trade-off. On the one hand, higher power concentration enables the voters' preferred politician to enforce larger parts of his agenda. On the other hand, higher concentration of power increases electoral stakes and thereby induces stronger distortions in policy choice. We identify a negative relation between the optimal level of power concentration and the extent of the politicians' office motivation. The results of an empirical analysis are in line with this prediction. The third chapter studies optimal income taxation in a model with labor supply responses at the intensive and the extensive margin. In contrast to the classical Mirrlees framework, a utilitarian desire for redistribution does not pin down the signs of optimal marginal taxes and optimal participation taxes. The chapter uncovers a non-standard tradeoff between efficiency at the intensive margin and efficiency at the extensive margin, which complements the standard equity-efficiency tradeoff and provides the economic intuition behind the ambiguous sign of the optimal marginal income tax.

This paper studies the effects of power-concentrating institutions on the quality of political selection, i.e., the voters' capacity to identify and empower well-suited politicians. In our model, candidates are heterogeneous in two unobservable quality aspects: ability and public-spiritedness. As voters can only base their ballots on the candidates' binding policy proposals, low-quality candidates face incentives to mimic their high-quality counterparts and a selection problem arises. We nd that powerconcentrating institutions amplify this selection problem as they increase electoral stakes and thus the incentives for mimicking. However, they also allocate more political power to the voters' preferred candidate. As a consequence, the optimal institutional setting depends on the con ict of interest between voters and candidates. The larger the con ict of interest, the smaller is the level of power concentration that maximizes voter welfare. A complete concentration of power in the hands of the election winner is optimal if and only if the con ict of interest is small.

This paper studies the effects of power-concentrating institutions on the quality of political selection, i.e., the voters' capacity to identify and empower competent politicians. In our model, candidates are privately informed about their abilities and are driven by office rents as well as welfare considerations. We show that variations in power concentration involve a trade-off. On the one hand, higher concentration of power enables the voters' preferred politician to enforce larger parts of his agenda. On the other hand, higher power concentration increases electoral stakes and thereby induces stronger policy distortions. We identify a negative relation between the optimal level of power concentration and the extent of office motivation. In particular, full concentration of power is desirable if and only if politicians are mostly welfare-oriented. The results of an empirical analysis are in line with this prediction.