The Making of Policy: Institutionalized or Not?

The Making of Policy: Institutionalized or Not?

Carlos Scartascini Inter-American Development BankMariano Tommasi Universidad de San Andres

This article attempts to build bridges in the formal study of policymaking across polities of different degrees of institutionaldevelopment. It explores the reasons why policymaking is fairly institutionalized in some polities but not in others. Itsuggests extending standard models of institutionalized policymaking to allow for a wider set of actions, including the threatof violence or of damage to the economy. It engages the discussion of institutions as rules and institutions as equilibria,delivering multiple equilibria with different degrees of institutionalization. The likelihood of institutionalized policymakingincreases as the cost of alternative political actions increases, as the damage these alternatives cause decreases, and as theeconomy becomes wealthier. In cases in which the distribution of de jure political power is more asymmetric, it is more likelyto observe use of alternative political technologies as well as low degrees of institutionalization.

Institutional systems differ significantly in thesecapacities [to absorb and process conflict]. . . Insome countries, for example Argentina, almostevery contentious issue finds thousands of peo-ple on the Plaza de Mayo, tractors blocking roads,and pickets cutting a bridge in Neuquen. In CostaRica, in contrast, almost all conflicts are disci-plined by political parties and processed throughthe congress, the presidency, or the courts.

—Adam Przeworski (2010, 116)

Formal analysis of policymaking within the realmof political institutions has deepened our under-standing of how various legislative and electoral

institutions shape economic policies. Political economistshave built on the foundations laid out early on by politicalscientists—such as Duverger, Sartori, Rae, Lijphart, Cox,

Carlos Scartascini is Leading Economist at the Research Department, Inter-American Development Bank, 1300 New York Ave. NW,Washington, DC 20577 ([email protected]). Mariano Tommasi is Professor of Economics, Universidad de San Andres, Vito Dumas 284,Victoria, Buenos Aires, Argentina, B1644BID ([email protected]).

We received valuable comments from Facundo Albornoz, Mariana Chudnovsky, Thad Dunning, Jon Eguia, David Epstein, Alberto Fohrig,Macartan Humphreys, Marcelo Leiras, Johannes Lindvall, Cesar Martinelli, Sebastian Miller, Massimo Morelli, Vicky Murillo, LeonardoPark, Pablo Pinto, Susan Rose-Ackerman, Frances Rosenbluth, Martın Rossi, Alejandro Saporiti, Ken Scheve, Ernesto Stein, David Stasavage,Susan Stokes, Kaj Thommson, Razvan Vlaicu, Federico Weinschelbaum, and seminar participants at Columbia University, George MasonUniversity, George Washington University, the Hertie School of Governance, the Inter-American Development Bank, Maastricht University,New York University, Universidad de Salamanca, Universidad de San Andres, Universidad Di Tella, University of Maryland, Yale University,the LACEA Meeting in Rio de Janeiro, the LACEA Political Economy Group Meeting in Cartagena, the Yale Conference on Fighting andVoting, the DC Comparative Politics and Political Economy Seminar, and the International Economic Association Meeting in Beijing. Wethank the Editor, an Associate Editor, and three reviewers for an extremely thorough and constructive revision process which has led toa much tighter and clearer article than the one we originally submitted. We are particularly indebted to Adam Przeworski for generouslysharing his ideas on these issues; to Fabiana Machado for allowing us to draw from our joint ongoing empirical work on protests in LatinAmerica, as well as for valuable suggestions; and to Laura Trucco for extraordinary research assistance, useful comments, and for allowingus to draw freely from joint ongoing work. Mariano Tommasi thanks the hospitality of the Research Department of the Inter-AmericanDevelopment Bank. The data used in this article are publicly available from the sources listed in the document.

and others—on the impact of formal rules on the work-ings of political institutions in order to study the impactof political rules on policy outcomes. In almost all of thisliterature (Persson and Tabellini 2000 is a standard text-book treatment), most or all of the relevant action takesplace within the context of these formal institutional rulesand relatively formalized institutional arenas (the votingbooth, the building of Congress, etc.). That is a goodapproximation for policymaking in various countries atsome moments in time (i.e., many developed countriesin the last several decades), but it is a much rougher ap-proximation in other cases.

Other than voting, forming political parties, bargain-ing in the legislature, and the like, there are a number ofalternative political technologies (such as threats of vio-lence and of disruption of economic activity) that in-dividuals or groups could utilize in order to influence

American Journal of Political Science, Vol. 00, No. 0, xxx 2012, Pp. 1–15

C© 2012, Midwest Political Science Association DOI: 10.1111/j.1540-5907.2012.00591.x

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2 CARLOS SCARTASCINI AND MARIANO TOMMASI

collective decisions. This article is an exploration of theimplications of an enlarged political action space for thestudy of institutions and policymaking. We believe this isan important step towards the integrated study of poli-cymaking in polities of different levels of economic andinstitutional development. There is a tendency to studypolicymaking in advanced industrial societies and in lessdeveloped countries in dichotomous ways, using widelydifferent models by assumption. These differential treat-ments are imposed exogenously; here we take a step inthe direction of studying such different polities within aunified framework that delivers different modes of poli-cymaking as an outcome of the analysis.

This article provides one specific example, extendinga standard legislative-bargaining model by allowing actorsthe choice of investing in playing in the legislative arenaor in utilizing an alternative political technology (APT)that allows them to threaten to impose costs on societyif some demands are not met. We analyze that game anduse the example as motivation to address some broaderissues of institutions, institutionalization, and policy-making.1 We investigate the way in which the presenceof these alternative political technologies, in interactionwith formal political institutions and underlying socioe-conomic structures, influences the workings of institu-tions, policy outcomes, and the use of such technologies inequilibrium.

One implication of the model and logic presentedhere is that different countries might exhibit differentdegrees of institutionalization in collective decision mak-ing. Countries do present a great deal of variation inthe way policymaking is conducted, including differ-ences in the degree to which formal institutions suchas Congress and political parties are the central locusof programmatic demands by socioeconomic actors, and(conversely) the degree to which socioeconomic interests

1In the article, “political institutions” refers to constitutional andelectoral “rules of the game” that define what political actors can do,as well as to the actors and arenas in charge of official policymaking(Congress, the courts). The “institutionalization” of policymakingrefers to the degree to which arenas such as Congress are indeed theplaces where societal actors focus their energies when trying to in-fluence policy. One can (as we do in our model) assign a great deal ofstructure to actions outside the formal institutions of governmentand in a strict sense call such actions highly “institutionalized.”That said, most people would agree to call bargaining in Congressa more institutionalized behavior than burning tires in the street(no matter how structured the latter activity might be). The found-ing reference on political institutionalization is Huntington (1968);a seminal application (to the U.S. Congress) is Polsby (1968). Seealso Blondel (2006) and the section on institutionalization thatfollows the presentation of the model.

use, instead, alternative political technologies to influencepolicymaking.2

Actors presented with choices will concentrate theirpolitical investments and actions in the place where theybelieve crucial decisions are made. Institutions reflect pastinvestments; summarize information, beliefs, and expec-tations; and incorporate self-reinforcement effects. Therelevance of specific institutional arenas for policymak-ing is a self-reinforcement phenomenon, potentially sub-ject to multiplicity of equilibria.3 When Congress and thepolitical party system are effective conduits of preferenceaggregation and political bargaining, various relevant ac-tors place their bets on (investments in) those institutions,most citizens believe they are the spaces where relevantdecisions are made, and this whole logic reinforces andbecomes self-fulfilling. On the contrary, if such institu-tional arenas are not taken seriously and everybody knowsthat the way of getting something out of the political sys-tem is to blockade a road or to bribe the president, in-vestments in the institutionalization of Congress and/orparties are not undertaken, and the weakness of formal in-stitutions is reinforced. Polities might therefore be stuckat higher or lower levels of institutionalization. Whilepolities in more institutionalized equilibria will behave aspredicted in the “tidy” literature on political institutionsand policies, polities in less institutionalized equilibriamight behave differently. One of the factors increasingthe likelihood of less institutionalized policymaking isthe asymmetry of power within formal institutions.

The empirical agenda that could move this projectforward is challenging, and one will need to develop con-vincing measures of the degree of institutionalization ofpolicymaking and to provide evidence of the superiorityof policies generated by more institutionalized environ-ments. One would also need proxies for the parametershighlighted in the model. Some of these measures (suchas formal institutional rules) are easy to come by, while

2These differences are striking not only when comparing advancedindustrial countries with poor developing nations, but also whencomparing across polities of similar level of economic develop-ment, as the epigraph from Przeworski (2010) reflects. Accordingto O’Donnell (1996), within Latin America, only in Costa Rica,Chile, and Uruguay do the executive branch, congress, parties, andthe judiciary function in a manner that is reasonably close to theirformal institutional rules, making them effective institutional knotsin the flow of political power and policy. The studies in Stein andTommasi (2008) reflect important variation across countries (and,in some cases, over time) in the institutionalization of policymakingin eight Latin American countries.

3In pursuing this argument, the article concurs with an analyticalcurrent that views institutions as equilibrium phenomena. Our useof “institutionalization” is quite close to the game theoretic notionof “institutions as equilibria” by authors such as Calvert (1995a,1995b), Greif (2006), and Aoki (2001).

THE MAKING OF POLICY 3

others are less obvious. While this article is far from offer-ing the last word on these issues, we refer to preliminaryattempts at measuring institutionalization variables andrelating them to other variables in theory.4 As such, oneof our objectives is to try to convince other scholars thatpursuing such empirical efforts is a worthwhile endeavor.

Policymaking with FormalInstitutions and Alternative Political

Arenas

Typical models of institutional policymaking such asthose summarized in Persson and Tabellini (2000) studypolicy determination specifying political institutions asthe rules of the game in which policies are decided. Suchmodels are quite explicit about those formal rules, butfor their analysis to be valid there is also an implicit as-sumption that actors in the model can only play withinthose rules and institutions; this assumes that alternativeactions are either technologically impossible or somehowforbidden by (enforced) decisions at some other level.That is not a bad approximation for studying policymak-ing in a number of modern polities (at least in normaltimes), but it seems to miss a very important part of theaction in other cases.

We suggest extending those models to include alter-native political actions undertaken in additional arenas,as well as the interactions among players in different are-nas. Borrowing the language of Acemoglu and Robinson(2006), we suggest calling de jure political power the oneassigned by formal political institutions and de facto po-litical power the one assigned by the technologies of al-ternative political action. For instance, if the alternativeto institutionalized decision making was the threat of vi-olence, such power would be conferred by the capacity toexercise violence.

The capacity to function within formal institutionsas well as the capacity to be effective through those alter-native channels will be, in part, endogenous to ex ante de-cisions by each player. Actors will have to make an ex antedecision on whether to invest resources in the more insti-tutionalized arenas, such as Congress or political parties,or to invest in alternative technologies (such as violence,or corrupting politicians). In the specific model below, theinvestment stage will be followed by a rather short game,which captures in expected value what is more properly

4For instance, one intriguing stylized fact that shows up in the datais the negative correlation between measures of institutionalizationand measures of the use of alternative political technologies.

a potentially long sequence of policymaking events giventhose initial investments.

Classifying a set of various possible political actions(actions to influence collective decision-making) into “in-stitutionalized” and “alternative” is to some extent an ar-bitrary choice. Which way one wants to classify things inpractice depends on the exact question at hand. Table 1presents several examples of political actions. Some ofthem, towards the left of the diagram in white, are closer tothe more institutionalized end of the spectrum (forminga political party, writing to your congressperson), whileothers, towards the right of the diagram in dark gray, areclearly within the realm of the alternative (road blockades,physical threats). A number of other political actions areharder to classify, including different forms of businessand union influence,5 as well as demonstrations to elicitpublic support. Going into the darker side of Table 1 andof reality, we would have no difficulty in classifying as “al-ternative” strategies such as that exercised by Colombiandrug lords when offering new judges the choice betweenplata (bribes) or plomo (bullets), as discussed in Dal Bo,Dal Bo, and Di Tella (2006).

In the rest of the article, we work at some level ofabstraction, focusing on a “black or white” classificationin which some actions take place within the institutionalrealm and others outside formal institutional channels.For concreteness, we will refer to the alternative politicaltechnology (APT) as “road blockades,” but the abstractformulation could also represent other things, such ascollective action by some economic sectors to damage theeconomy.

In the model it is assumed that taking the institutionalroad or the “street” road are indeed alternatives. This is asimplified way of capturing an important point of our ar-gument, which emphasizes the investment component ofinstitutions. Political actions such as voting, campaign-ing for your favorite candidate, writing letters to yourcongressperson, participating in peaceful protests, par-ticipating in violent protests, threatening to kill your op-ponents, and killing Supreme Court Justices need not besubstitutes. Under some conditions they are used jointly,

5Some forms of lobbying would fit more naturally in the “insti-tutionalized” part of the game—as when Grossman and Helpmanstate, referring to the United States, “according to the survey find-ings, the activities undertaken by the greatest numbers of organizedinterest groups are those intended to educate and persuade lawmak-ers of the wisdom of the groups’ position” (2001, 4). Other formsof business influence are much closer to the darker part of Table 1.See Harstad and Svensson (2011) for an insightful distinction be-tween lobbying and bribing. Strategies employed by unions varyfrom extremely institutionalized actions in Parliament and the con-stitutionally sanctioned right to strike, to the borderline-criminalphysical intimidation utilized in some countries at some points intime.


TABLE 1 Alternative Political Actions

More Institutionalized Less Institutionalized

forming a political party demonstrations to inspire sympathywriting to your congressperson legal strikes road blockadescampaign contributions subtle coordination of capital flight coordinated economic disruptionclean lobbying bribes (“plata”) violent threats (“plomo”)

FIGURE 1 Congress or the Street? (18 Latin American Countries,2008)

Argentina

Colombia

Bolivia

Costa RicaGuatemala

Ecuador

PanamaNicaragua

Mexico

Honduras

Peru

Paraguay

Rep.Dom.

Venezuela

Uruguay

El SalvadorBrazil

Haiti

Rep.Dom.

.05

.1.1

5.2

.25

.3P

erce

ntag

e w

ho P

artic

ipat

ed in

Pro

test

s

.02 .04 .06 .08Percentage who Contacted Member of Congress

and under other conditions they are used separately bydifferent actors in different political equilibria. Pendinga more general understanding of the conditions underwhich different actions are taken jointly or separately,this article emphasizes mechanisms (such as investmentunder budget or time constraints) that make these ac-tions alternatives.6 Figure 1 suggests that citizens in LatinAmerica tend to view contacting their representatives inCongress and protesting in the streets as alternative po-litical options.

The actors in our game, then, will have to make aprior decision on whether to enter the more formal orthe less formal arenas of political action. These decisions

6As discussed in the conclusion, one interesting substantive ex-tension would incorporate a third “opportunity cost” dimension,allow for further actor heterogeneity, and generate richer predic-tions both at the individual level (who participates and how) andat the level of country equilibria.

at the level of individual actors are then aggregated inequilibrium. Political actors take different roads depend-ing on what the environment has to offer them, and theiraggregate choices have an effect on that environment.This bidirectional causality is at the heart of the issuesof reinforcement and multiplicity of equilibria, which weelaborate upon after presenting the model.

Connection to the Literature

Our contribution is obviously not totally novel; it drawsinspiration and insights from various extant literatures.Previous contributions considering the impact of al-ternative political technologies on some aspects of theworkings of formal political institutions include Ellmanand Wantchekon’s (2000) study of electoral competition


under the threat of political unrest, and studies by DalBo and Di Tella (2003) and Dal Bo, Dal Bo, and DiTella (2006) on political agency models in which interestgroups can harm politicians.7 Humphreys (2001) ana-lyzes allocations when the enforcement of bargains can-not be taken for granted; Humphreys defines such en-vironments as “weakly institutionalized.” Levitsky andMurillo (2009) explore issues related to those exploredhere, attempting to conceptualize the notion of insti-tutional weakness and also to emphasize the notion ofinvestments in institutions. There are very rich liter-atures studying contentious political actions and po-litical violence, but only recently have these types ofpolitical actions, such as voting, begun to be studiedin an integrated manner with more institutionalizedones (Dunning 2011 and references there). Our dis-cussion is also related to studies of economic agents’choice of whether to produce or to fight, for instanceHirshleifer (2001) and Garfinkel and Skaperdas (1996).See also Lindvall (2008) for a recent model of protests.

Przeworski (2009) is an insightful recent effort moti-vated by the same questions and Latin American observa-tions as this article. Even though this article touches upongeneral discussions, our empirical referent is modern-dayLatin America: countries with intermediate levels of in-stitutional development where electoral democracy is notin question, but where the issue is the degree to whichplaces such as Congress are effective institutional knots inthe flow of political power and policy. The literature ondemocratic consolidation is concerned with similar issuesat a higher level, where the variable of concern is democ-racy itself. For instance, in the words of Adam Przeworski,“if democracy is to be consolidated, distributive conflictmust be institutionalized: all major political forces mustchannel their economic demands through the democraticinstitutions and abjure other tactics” (1992, 127).

In the conclusions, we speculate on ways in whichsimilar models could be used to think about transitionsfrom autocracy, which is not the focus of this article.

A Model: Congress or the Street?

Any model within the framework suggested will needto specify three components that will constitute sets ofexogenous parameters for comparative statics purposes:(1) policy problem (mapping from feasible policy vectors

7Bueno de Mesquita et al. (2003) is an ambitious effort that similarlygoes beyond standard assumptions in order to encompass a (much)broader set of situations than usually studied in the institutionalliterature.

to utilities of the players, which subsumes aspects of thesocioeconomic structure and available policy technolo-gies); (2) political institutions; and (3) alternative politicaltechnologies (APTs). Any assumption about (3) will em-bed considerations of mappings from alternative actionsto utilities, as well as about collective action, commitmenttechnologies, allocation protocols in informal arenas, andprotocols of interaction among different political arenas.In the spirit of a first article of what we hope will be alonger line of models of institutions enriched with alter-native political actions, we have chosen very simple “com-ponents” for the various parts of the model. We chose aparticularly simple formulation for the institutionalizedpart of the game (a baby legislative-bargaining model),an exceedingly stark alternative political technology, anda very streamlined logic of interaction among those twoarenas. Modifying any of these assumptions constitutesthe comparative statics agenda we want to promote. Inthe concluding section, we suggest a few such extensions.

In the example here, the policy problem is a standardallocation problem of splitting a pie of size X among nrisk-neutral players, and political institutions are a simplevariant of the well-known legislative-bargaining modelset forth by Baron and Ferejohn (1989), which we explainbelow.8 For brevity and concreteness, the APT is describedas a road blockade (“going to the street”). Participatingin a road blockade has an individual cost c . If at leastT players protest, they can (credibly) threaten to inflicta damage of size K , with T ≥ 2 and 0 < K < ( n−1

n ). Iffewer than T people engage in the blockade, they cannotcause any damage. This simplified damage technology isrepresented in Figure 2, where m stands for the numberof people who choose this alternative. This formulationcaptures in a stark manner some properties of the frame-work; in particular, it embeds a scale economy / strategiccomplementarity that will be the seed of multiplicity ofequilibria. (Parameters such as c or T will depend on var-ious issues, including “repression technologies” in place.)It is also assumed that “The Street” acts as a unified actor,ignoring collective action issues among those blockingthe streets (after the threshold T) (assumption A1), itsplits whatever it receives equally among its members (as-sumption A2), and it is endowed with a commitmenttechnology: it can commit ex ante to cause damage or notin response to specified actions by players in the formalarena (assumption A3).

8It is more straightforward to think of this example as direct democ-racy, where the players who could go to Congress are the citizensthemselves. Alternatively, players can be understood as the underly-ing constituencies, each of which could be represented in Congressby a perfect agent (if the constituency chooses to invest in thatrepresentation).


FIGURE 2 Damage Technology

K

Maximum possible damage

T m

The latter assumption, common in the related liter-ature (Dal Bo, Dal Bo, and Di Tella 2006; Ellman andWanchtekon 2000),9 is imposed to avoid a lengthy anal-ysis of the conditions under which such a threat wouldbe credible, which would require adding more structureto the extensive form or turning it into a repeated gameto include considerations of reputation. In the context ofnonrepeated games, the threat of damage would be cred-ible when it constitutes a weakly dominant strategy in thefinal move, something that could be easily adjusted in ourmodel. Furthermore, there is an important literature onfairness, altruistic punishment, and spitefulness, whichargues that punishments are indeed inflicted even whenthey are costly for the punisher in narrow self-interestterms.10 Those results, often obtained in rather asepticexperiments, are even more likely to obtain in the specificcontext of our focus: once the protesters are out in thestreet, it might be easier to enforce “damage in case ofunfulfilled demands” than “no damage in case of fulfilleddemands.”11 There are also some technologies, such aspermanent squatting, where it is more costly to stop in-flicting costs on others (leaving) than to continue doingso (staying).

Let N = {1, 2, . . . n} be the set of players. The econ-omy is subject to the aggregate constraint

∑ni=1 xi ≤ X.

Each player maximizes his or her piece xi ≥ 0, net of apossible cost c that he or she pays in some cases. Each

9Even in Acemoglu and Robinson (2006), in a different context,exogenous assumptions are imposed in order for the threat ofrevolution to be credible.

10See, for instance, Bahry and Wilson (2006), Henrich et al. (2004),and Levine (1998).

11As Maurice Thorez, longtime leader of the French CommunistParty, remarked in 1936, “One has to know how to end a strike”(quoted in Przeworski 2009, 24). These issues have been stud-ied in the literature on collective behavior, for instance Marx andMcAdams (1994).

agent is endowed with pi units of (ex ante) de jure politi-cal power, with pi < pi+1, and

∑ni=1 pi = 1. The timing

of the game, represented in Figure 3, is as follows.12

Investment Stage (Venue Choice Game):Stage 1. Each player (simultaneously) chooses an ac-

tion ai ∈ {0, 1}, where ai = 1 means going to Congressand ai = 0 going to the street, which carries a cost c > 0.

This action represents an investment that enables theplayer to become effective in one of the two arenas.

∑ai

will be the aggregate investment in formal institutions,capturing the degree of institutionalization, which wediscuss after solving the model. Let m be the numberof players who go to the street, and n − m the number ofplayers who go to Congress. Let M denote the set of play-ers in the street and N\M the set of players in Congress.

Policymaking Stages:Stage 2. Among those who went to Congress, nature

chooses an agenda setter �. Each player i in Congress hasan ex post probability pi/

∑j∈N\M p j of being recognized

as the agenda setter.Stage 3. The players in the street announce levels of

damage d they will inflict on the economy as a functionof the amount Z they collectively receive from “the gov-ernment.” By A3, that threat is credible. By A2, each ofthem receives a piece z = Z/m. Let T ≥ 2 be a thresholdof critical mass for action in the street. If m ≥ T they cancause a damage of size K ; otherwise they cannot causeany damage.13

Stage 4. After listening to the threat of The Street, theagenda setter in Congress (i = �) proposes an allocationof the pie s � = {s �

i }iεN . For brevity, we introduce the expost distributional assumption A2 as an ex ante constrainton the agenda setter’s proposal, by requiring at this stagethat the share for each person in the street is the same,that is, s �

i = z� ∈ [0, 1/m] for all i ∈ M.Stage 5. The n − m players in Congress vote on s �. Let

�i ∈ {0, 1} denote the choice of congressperson i , where

12We are implicitly assuming complete information, a commonfirst modeling step. Interesting additional insights could be ob-tained by adding asymmetric information. If some aspects of thecollective action or damage capacity of protesters were stochasticand unobserved by institutionalized actors, we might have equilib-ria with occasional outbreaks of violence, a realistic feature sharedby models of incomplete information in oligopoly, war, and strikes.

13Let d(Z) be the possible damage function, or feasible damagecontract. If m < T , then d(Z) = 0 for all Z. If m ≥ T , d(Z) :[0, X] → {0, K }. (We assume for brevity that the range of thedamage function can only take discrete values.) If m = 0 this stagebecomes irrelevant, and the rest of the game reduces to a traditionallegislative game with only stages 2, 4, and 5.


FIGURE 3 Timing of the Game

0 and 1 respectively represent voting against and for �’sproposal.

The outcome of the legislative process, the vectors = {si }i∈N , will be:14

s =

⎧⎪⎪⎨⎪⎪⎩

s � if∑

i∈N\M�i ≥ 1

2(n − m)

{0, 0, . . 0} if∑

i∈N\M�i <

1

2(n − m).

Stage 6 . Those in the street implement the damageannounced in 3.

Stage 7 . The allocation is implemented. If no damagewas caused, each player receives xi = si X . If damage wascaused, each player receives xi = si (X − K ).

Solving the Model

The solution is proven formally in the online SupportingInformation section. The model is solved by backwardinduction in two steps. First we find equilibrium play forany partition of the set of players and for any realizationof the agenda setter consistent with that partition. Thenwe find the Nash equilibria to the venue choice of allplayers in stage 1, taking as continuation payoffs thosederiving from the policymaking game. We provide herean intuitive explanation of that solution.15

Given the assumption of commitment by protesters,stages 6 and 7 are mechanically implemented after deci-sions 4–5 are made. The latter is a standard legislative-

14Nothing of substance will change if the status quo vector is allowedto be nonzero. This could be an additional source of heterogeneity,which is captured here in an ex ante manner by the vector of pi ’s.What actually matters for the relevant decisions is their expectedutility in Congress before the agenda setter was selected by nature.This is a reduction of a richer intertemporal structure (where those“included” will eventually get their share) into a one-period model.

15The solution concept we use is subgame-perfect Nash equilibriumin weakly undominated (voting) strategies. See Patty, Snyder, andTing (2009) for a discussion of this concept.

bargaining game with a small twist. It is easy to show thatthe agenda setter will give her status quo reservation level(which is zero in our simplified model) to a minimum-winning coalition of players in Congress, nothing to theother players in Congress, and (hence) allocate the wholepie, except anything given to the protesters, to herself.The novel question is how much to give to the protesters.Clearly, if m < T , the agenda setter will give nothing toprotesters. If m ≥ T , then the amount she will allocateto the protesters will depend on the amount Z that theyrequest. If they request Z > K , the agenda setter will givethem nothing, since it is better to keep (X − K ) than(X − Z). If they request Z ≤ K , then the agenda setterwill grant them Z. This response will lead the protesters(in stage 3) to request exactly Z = K , since they will getnothing if they go above K , and K is preferred to anythingbelow it. Each protester will receive K /m.

Given that stage 2 is a move by nature, this brings usto the key choice of arenas in stage 1. Each player has todecide between the two arenas, given his expectation ofwhat he will receive if he goes to Congress and if he goesto the street, taking as given the choices of all the other(n − 1) players. Finding equilibria to the whole game,then, consists of finding the Nash equilibrium to these nindividual decisions on ai . We present the results in thefollowing proposition, which is presented more formallyand proven in the Supporting Information.

Proposition 1.

(a) There always exists a Full InstitutionalizationEquilibrium (FIE) in which everybody is inCongress and no alternative arenas are used.

(b) For some parameter values, there is also a Low In-stitutionalization Equilibrium (LIE) in which m∗

actors go to the street.

The existence of the FIE is guaranteed by the fact thatif only one player chooses to be in the street in order to seta blockade, he will be unable to credibly threaten to causeany damage, and hence will receive zero from the agendasetter, getting a final payoff of –c , which is less than what


FIGURE 4 Low Institutionalization Equilibrium

Go to Congress Go to street

he would expect to receive in Congress. No one wouldwant to deviate unilaterally from a FIE.

Figure 4 provides an intuitive representation of theLIE. The figure plots the value of being in Congress (theupward-sloping curve) and the value of being in the street(the downward-sloping curve) from the point of view ofan individual player as a function of his or her type (i)and probability of being the agenda setter ( pi ), under theassumption (which is true in the type of LIE we select,see Supporting Information) that all players of lower p j

will be in the street, and all players of higher p j will bein Congress. Let m∗ be the highest integer to the left ofthe point where these two curves intersect. Players 1 tom∗ (those with the lowest ex ante probabilities of beingselected agenda setter in Congress) will go to the street,and players m∗ + 1 to n will go to Congress. The resultis fairly intuitive: players with weaker chances of gettingwhat they want in formal political institutions are the onesmore likely to utilize alternative political technologies.16

The low institutionalization equilibrium takes usback to the world of the models described in the introduc-tion, where the institutionalized part of the game is theonly relevant one—i.e., public policies are decided in for-mal arenas (and actors invest in institutional capabilities,

16The statement in the text is literally true for distributions of pi

which are sufficiently steep around the equilibrium level m∗. Forthat to be also true in general (and especially for fairly egalitarianpi ’s), some further refinement is necessary, as discussed in theSupporting Information.

as we argue in the next section). The low institutionaliza-tion equilibrium, on the other hand, will be characterizedby the use of alternative political technologies and by theweakness of formal institutional arenas.

On Institutionalization(and Multiple Equilibria)

The simple static model above provides glimpses intomore general issues we want to raise regarding differ-ent degrees of institutionalization of policymaking acrosspolities. In particular, the model captures in a very com-pressed way (through the initial investment, and throughbeliefs about other people’s actions implicit in differentequilibria) some richer dynamics characterizing institu-tions and institutionalization. Institutions reflect past in-vestments; summarize information, beliefs, and expecta-tions; and incorporate self-reinforcement effects.

Recognizing that there is no agreed-upon terminol-ogy with respect to institutions and institutionalization,we would say “the U.S. Congress is more institutionalizedthan the Argentine Congress.” The U.S. Congress is a cen-tral institution in U.S. policymaking; its members exhibitremarkable longevity and specialize in committees; it en-gages in considerable oversight of the public bureaucracy,and it is the focus and main entry point of political actionby any interest group attempting to influence Americanpolicymaking.17 The Argentine Congress does not shareany of these features, in spite of the fact that Argentinahas a constitutional structure similar to that of the UnitedStates (Jones et al. 2002). The comparison can also bemade among countries of similar levels of development:the Chilean legislature plays a much more important rolein the policymaking process of that country than does itsArgentine counterpart (Stein and Tommasi 2008). Thesedifferent roles in policymaking are associated with vari-ous measures of legislators’ and legislatures’ capabilities,which have a clear investment component or that reflectthe beliefs of various actors: longevity of legislative ca-reers, legislators’ education, specialization in policy com-mittees, resources available for policy analysis, esteem inthe eyes of the public, and appreciation of Congress asan important place in politicians’ careers—Saiegh (2010)builds measures of such characteristics.

17Polsby (1968) is the founding reference on the institutionaliza-tion of the U.S. Congress. Our notion of institutionalization sharesPolsby’s suggested components of a definition of institutionaliza-tion (focused on internal organization), but adds other elementsthat reflect its importance in the broader equilibrium, includingthe beliefs about its relevance, along the lines of the “external con-siderations” emphasized by Blondel (2006).


When Congress and the political party system areeffective conduits of preference aggregation and politi-cal bargaining, various relevant actors place their betson (make investments in) those institutions, most citi-zens believe that those are the spaces where relevant de-cisions are made, and this whole logic reinforces and be-comes self-fulfilling. On the contrary, if such institutionalarenas are not taken too seriously and everybody knowsthat the way of getting something out of the politicalsystem is to blockade a road (or to bribe the president),those investments in the institutionalization of Congressor parties are not undertaken, and the weakness of formalinstitutions is reinforced. The logic of self-reinforcementof institutions is central to the concerns of various strandsof institutionalism in the social sciences.

Scholars in the game theoretic tradition (as well ascommon usage) refer to institutions “as rules,” and also“as equilibria.” The standard “Northian” definition hasbecome “the rules of the game in a society, the humanlydevised constraints that shape human interaction.” Anumber of scholars have turned to a conception of in-stitutions as equilibrium phenomena. It is ultimately thebehavior of others rather than the rules themselves thatinduces each person to behave (or not) in the way pre-scribed by the rules.18 The model above captures these twodistinct usages of the notion of institutions in a simplemanner. On the one hand, it has political institutions asrules in the allocation of de jure political power (the rulesof the Baron-Ferejohn game). On the other, it generatesdifferent degrees of institutionalization in equilibrium,as captured by

∑ai , the aggregate investment in formal

institutions (which is a fixed point in the beliefs of allactors with respect to the actions of everybody else).

Even within the context of a simplified static model,the result of having multiple equilibria (with differentequilibria characterized by its degree of institutional-ization) captures an important aspect of institutions.It also opens the door for the very relevant considera-tions so important to historical institutionalists (Piersonand Skocpol 2002; Thelen 1999) on the way in whichspecific temporal sequences, critical junctures, and his-torically grounded events matter in explaining differenttrajectories.

Multiplicity of equilibria arises in the model of thisarticle due to a stark strategic complementarity introducedby the shape of the damage technology. Beyond the speci-ficities of our formulation, an extreme simplification ofthreshold models of collective action (Granovetter 1978;

18This view has a long pedigree, but in its modern formulation hasbeen pioneered by Greif (see, e.g., 2006), Calvert (1995a, 1995b),and Aoki (2001). For a recent survey, see Greif and Kingston (2011).

Lohmann 1994; Oliver 1993), there are a number of rea-sons to expect strategic complementarities, reinforcementeffects, and hence the possibility of multiple equilibriain institutionalization. Unconventional forms of politicalparticipation tend to be chosen where institutions are oflower quality, but those very decisions feed back into theweakness of formal institutions. Strategic complemen-tarities are likely to be present in the action choices ofplayers with regard to any given APT (as already presentin the model),19 but also with regard to the actions andinvestment choices within any specific formal institution,such as Congress. Furthermore, there are reasons whyalternative activities of one type are likely to induce al-ternative activities of other types. For instance, Trucco(2009) shows a complementarity between “bribes by therich” and “street protests by the poor” as countervail-ing forces that tend to happen together in polities withweaker political institutions. Similarly, there tend to beimportant systemic effects across various institutional-ized arenas. For instance, Stein and Tommasi (2007) andScartascini, Stein, and Tommasi (2009) show a positivecorrelation among measures of institutional strength invarious domains (Congress, party system, judiciary, thebureaucracy) across countries.

Even though not quite modeled explicitly in this ar-ticle, having different degrees of institutionalization ofpolicymaking has important welfare consequences. Inour simple model, the cost of incomplete institutional-ization is just cm∗. There are various reasons (some ofwhich could be incorporated in a richer dynamic formu-lation of this model) why more institutionalized collectivedecision-making arenas tend to lead to better policies andbetter outcomes. Investing in technologies that increasestrength and capabilities in the institutionalized game(such as hiring PhDs in Public Policy) or in technolo-gies that increase strength and capabilities in alternativearenas (such as hiring goons) is likely to have a differ-ent impact on the strength and productivity of formalinstitutions, as well as on the quality of the output thepolity generates. Scartascini and Tommasi (2012) showthat more institutionalized policymaking environmentsare associated with better public policies, which in turninduce better economic outcomes. One of the reasonsbehind that result is likely to be that more institutional-ized policymaking arenas provide a better structure forexchange of information and for the agreement and en-forcement of intertemporal cooperation. According toPierson, “political institutions can serve to coordinate the

19Machado, Scartascini, and Tommasi (2011) find that the like-lihood that any individual would participate in street protests isincreasing in the total number of people protesting.


behavior and expectations of decentralized actors (Carey2000) and to facilitate bargaining by creating monitor-ing bodies, issue linkages, and mechanisms for makingcredible commitments” (2004, 107).

Multiplicity of equilibria has important implicationsin terms of theory, in terms of interpreting and analyz-ing empirical evidence, and in terms of thinking aboutpossible practical recommendations. Before closing thesection, we want to say a word regarding the implicationsof this analysis for cross-country econometrics on the ef-fects of formal political rules. The effects of constitutionalrules on policymaking and performance might be condi-tional on the type of equilibrium achieved by each polity.The standard predictions in the literature might applyfor countries at the full institutionalization equilibrium,but not necessarily for countries with low institutional-ization. Caruso, Scartascini, and Tommasi (2010) explorethis issue by clustering countries into those with high andthose with low levels of institutionalization.20 Using thoseclusters, it reproduces within each cluster the empiricalexercises of Persson and Tabellini (2003), who study theeffects of political constitutions on fiscal outcomes. All ofthe results in Persson and Tabellini 2003 are replicated forthe high-institutionalization sample, but almost none ofthe results are significant for the low-institutionalizationsample of countries.

Comparative Statics / EmpiricalPredictions

One important question is what the implications of equi-librium multiplicity may be for attempting to map thepredictions of the model onto empirical evidence. For-tunately, the simple structure of the model enables usto make some comparative static predictions in spite ofhaving multiple equilibria. Under the assumptions of themodel, the FIE always exists, while the LIE exists for someparameter values and not for others. This means thatfor some parameter values the FIE will be the only equi-librium possible (call that set of parameters F), while forother parameter values both types of equilibrium are pos-sible (call that set of parameters B). If the real world werefully described by this model, then we would expect thatin polities characterized by a vector of parameters belong-ing to F we should observe the characteristics associatedwith the FIE, while in polities characterized by a vector of

20The clustering of countries is performed using available measuresof congressional capabilities, party system institutionalization, bu-reaucratic capabilities, and judicial independence as proxies for thedegree of institutionalization.

TABLE 2 Comparative Statics

Probability of being inthe non institutionalizedequilibrium (or inverse

degree ofParameter institutionalization)

↑Threshold of collectiveaction in the street (T)

–

↑ Cost of using APT (c) –↑ Damage potential (K) +↑ Wealth (X) –↑ Asymmetry distribution of

de jure political power(asymmetry distributionof pi’s)

+

parameters belonging to B we could observe either of theequilibria. Assigning in the latter case a nonzero proba-bility to each of the equilibria will be sufficient to generateempirical predictions. If conducting comparative staticson any given parameter increases the set of other param-eters for which LIE is an equilibrium, then we will saythat increasing that parameter increases the possibility ofobserving the Low Institutionalization Equilibrium (andits associated properties).

It turns out that in the model, almost any compar-ative statics exercise that increases the possibility of LIEalso increases the number m∗ of people going to the streetswithin the LIE (see the Supporting Information), so thatthe derivative of m∗ with respect to any parameter is a suf-ficient statistic for the way in which that parameter affectsthe degree of institutionalization in either interpretation.(The only exception is the threshold T , which also hassimple comparative statics). Using that logic, we derivein the Supporting Information the comparative static re-sults summarized in Table 2, which we state as conditionsunder which noninstitutionalized politics are more likelyto be sustained.

Not surprisingly, the probability of being in the LIEincreases as the use of APTs becomes less costly, as thepotential damage APTs can cause increases, and as thewealth of the economy decreases. More interestingly,the probability of being in a Low InstitutionalizationEquilibrium increases as the distribution of de jure politi-cal power becomes more asymmetric. As the vector of pi ’sbecomes more asymmetric, more actors at the lower endwill find participation in formal political institutions lessappealing, inducing more street action and lower institu-tionalization. The model predicts that, in general, those


FIGURE 5 Correlation (Institutional Strength;Use of One Particular Alternative Political Technology)

-20

24

6

-2 -1 0 1 2Institutional Strength Index

less favored by de jure political power are more likely to en-gage in noninstitutionalized actions,21 and furthermore,that the more asymmetric political power is, the greaterthe numbers taking the outside option and the lower theinstitutionalization in equilibrium.

We have undertaken some preliminary steps towardsthe empirical study of some of the correlations predictedby the theory, using international measures of institu-tional quality which we believe serve as proxies for thestrength of policymaking institutions as understood inthis article. These measures, taken from Scartascini, Stein,and Tommasi (2009), include proxies for the strength andinvolvement of the legislature in policymaking, severalaspects of party system institutionalization, and bureau-cratic capabilities. These proxies for institutional strengthhave been combined with information on a number ofpolitical activities from the Cross-National Time-SeriesData Archive (Banks 2011), combined under the headingof “Internal Conflict,” which we take as a rough measureof the APTs emphasized in this article. The logic presented

21This result has a flavor of “exclusion of the poor.” Yet, the re-sult is more general than that, and it applies to any case in whichthe de jure power of a relevant set of political actors tends to un-derrepresent them in comparison to their ability to put collectiveaction together and threaten economic disruption. The very visible2008–2009 demonstrations of rural producers in Argentina againstlarge increases in export taxes by the government are a case in point.Those demonstrators were not the dispossessed, but an economicsector underrepresented in the Argentine political system.

above implies that in equilibrium there should be a nega-tive correlation between the strength of political institutionsand the use of alternative political technologies. Our mea-sures of institutional strength tend to be negatively corre-lated with the measures of conflict, with the coefficientsbeing statistically significant in univariate and multivari-ate regressions with standard controls such as GDP percapita, regional dummies, and level of democracy. Figure5 shows one of these correlations between internal conflictand a combined measure of institutional strength.

The argument presented in this study also has impli-cations for correlations among institutional and conflictvariables with some characteristics of policy outcomes:for instance, a positive correlation between weaker insti-tutions, more use of alternative political technologies, andpublic policies that favor some actors disproportionately. Po-litical institutions that generate more biased policy out-comes are likely to lead to increased use of alternativepolitical technologies, and this induces weaker invest-ments in the institutionalization of policymaking. Wehave also found a positive correlation between the useof APTs and a measure of biases in government policycompiled by World Economic Forum called favoritism,as well as a negative correlation between favoritism andinstitutionalization.22

22This is consistent with observations in O’Donnell (1996), whocharacterizes many Latin American democracies as having both


Conclusions and Extensions

The objective of this article is to suggest a framework(a modeling strategy) to articulate insights from the richliterature on the effects of political institutions on policyinto a broader view of policymaking, and it does so byendowing political actors with a larger action space. Suchan effort could prove particularly useful for the studyof policymaking in developing democracies, as well asfor integrating such analyses across countries of differentlevels of economic and institutional development.

The model presented in this article has the followingimplications. First, different countries have different de-grees of institutionalization in their policymaking. Sec-ond, there is multiplicity of equilibria, allowing similarcountries to be stuck at different levels of institutional-ization, self-reinforcing dynamics, and the possibility ofequilibrium switches. Third, the likelihood of institution-alized policymaking increases as the cost of alternativepolitical actions increases, as the damage these alterna-tives can cause decreases, and as the economy becomeswealthier. Fourth, if the distribution of de jure politicalpower is very asymmetric, the use of alternative politicaltechnologies and low degrees of institutionalization arelikely to be observed.23

There are various pending tasks in the agenda de-scribed in the article, such as enriching various aspectsof the model to permit comparative static exercises oneconomic structure, APTs, and formal political institu-tions. To begin with, one can give more structure to theeconomy and more specific characteristics to the actorsin the policy game. Costs and potential effects of variousforms of collective action are distributed in much morespecific manners than the fairly “flat” topography rep-resented by the APT in the model. The various ci ’s ofdifferent actors could be a function of who else is partici-pating in that activity, facilitating collective action acrossparticular sets of agents, such as workers in sectors withhigh “damage capacity.” More generally, there are variousstructural, historical, and perceptual factors that affectspecific forms of collective action. ci ’s as well as potentialrewards from such activities will be a function not only ofwho else protests, but also of the history of organizationof such movements, and of the beliefs about the legiti-

weak institutions and particularism (a combination that he definesas “another institutionalization”).

23Ongoing work suggests two additional implications. One is thathigh costs of using formal institutions (for instance, due to agencyproblems) can lead to the use of APTs and to low institutionaliza-tion; the other is that there are strategic complementarities acrossthe use of different APTs.

macy of the protest by other actors who might matter forthe degree of repression.

We chose a particularly simple formulation of theinstitutionalized part of the game, a stark alternative po-litical technology, and a very streamlined logic of inter-action between those two arenas. Our assumptions aboutthe proposal stage, the voting stage, and the (potential)damage stage could be fruitfully extended in ways thatcould lead to richer models that could generate furthernew takeaway messages. For instance, given our specificformulation of legislative bargaining and of the dam-age technology, legislators are indifferent with respect toboth the outcome of the vote and whether there are riots.That is because we are assuming that protesters can onlyshrink the pie that the government has to allocate, butnot cause damage or attempt to force redistribution ofendowments. That is clearly an assumption that makessense in some contexts and not in others (in the spiritof the comparative statics on economic and social struc-tures we want to promote). In richer models, one couldanalyze more complex potential interactions with “thestreet,” which in turn would lead to a broader consid-eration of possible proposals and voting strategies. Forinstance, in many cases one would want to make the leg-islators’ voting strategy depend as well on how much theprotesters are being offered.

An interesting extension would consist of a richerset of alternative political technologies, with different so-cioeconomic actors having differential access to each ofthe technologies. Various technologies used extensively bythe well-off in some developing countries give them priv-ileged access to policymaking. Trucco (2009) provides astart in that direction, and her results suggest the presenceof a strategic complementarity between the uses of bribesand of road blockades. “Bribes by the rich” and “protestsby the poor” can be seen as countervailing forces thattend to happen together in polities with weaker politicalinstitutions.24

Other extensions might allow actors to invest in bothinstitutions and alternative technologies and to use theoutside threats in their institutionalized negotiations. Ad-ditionally including a “third activity” or opportunity costwould allow studying the form of political participationby different actors across countries and relating that toinstitutionalization.

Natural extensions might come from moving awayfrom our simple legislative-bargaining formulation andfishing in the abundant pond of formal models of polit-

24Such an extension’s empirical predictions—bribes positively cor-related with other APTs as protests, and negatively correlated withinstitutionalization—seem consistent with preliminary evidence.


ical institutions for richer institutional comparative stat-ics. For instance, what would be the effect of alterna-tive electoral rules (proportional versus majoritarian) onthe degree of institutionalization of policymaking? Onemight hypothesize that PR systems, allowing a better rep-resentation of minorities, might lead to more symmetricdistributions of de jure political power and hence to moreinstitutionalized behavior.25 What would be the effect ofregime type (parliamentary or presidential) on the de-gree of institutionalization of policymaking? To deal withquestions like these, one will need to move in the di-rection of representative democracy, with models thatpermit exploring the electoral connection and agencyissues.

Another line of useful extensions might come frommoving to more dynamic specifications. The articlecouches some of its interpretation in terms of the “dy-namics of institutionalization.” This is just a heuristicthat captures the extent to which institutionalization is afunction of shared expectations. (Almost all static gametheoretic equilibria are simplified depictions of processesthat indeed take place over time.) Another sense of dy-namics would be the question of how a country arrives at(or switches towards) a particular equilibrium. Address-ing such transitions is an important pending task. Also,the model has treated constitutional rules as exogenous,a natural first modeling step (Diermeier and Krehbiel2003). This can be embedded in a richer game in whichsuch rules are chosen at an earlier stage, including ourmodel here as a continuation subgame. Such a modelingstrategy would be quite complementary to the Acemogluand Robinson (2006) logic, providing a bit more struc-ture to their (unmodeled) threat of collective action dueto temporary de facto power.26

There are various possible implications from the re-sults here and from the eventual next steps. To high-light one of them (in light of the results in Caruso et al.2010), the existence of different levels of institutionaliza-tion may imply that some influential research in politicaleconomics is not necessarily applicable to every type ofcountry. Studies on the impact of political institutions on

25This seems consistent with the finding in Vernby (2007) thatstrikes are more common in countries with majoritarian electoralsystems.

26As already stated, this is not an article about popular revolts at-tempting to reach democratization (or other concessions) in thecontext of autocratic regimes. That is, the article is not about poten-tial transitions away from autocracies, but more about steady statesof low- or medium-level institutionalization in already democraticregimes. Having said that, we believe that some aspects of ourcurrent formulation, properly adjusted, could provide a compo-nent of richer models better attuned to studying those transitionalsituations.

policies should incorporate the possibility that politicalrules might have different effects depending on the arenasin which policies are determined in each polity, as wellas the possibility that the arena itself might depend onpolitical rules. This should also raise a flag for those inthe business of recommending institutional reforms fordealing with failing policies.

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Supporting Information

Additional Supporting Information may be found in theonline version of this article:

• Solution of the Game (and proof of Proposition 1)• Comparative StaticsFigure A1: Low Institutionalization Equilibria

Figure A2: More Unequal Distribution q Leads toLarger m∗

Please note: Wiley-Blackwell is not responsible forthe content or functionality of any supporting materialssupplied by the authors. Any queries (other than missingmaterial) should be directed to the corresponding authorfor the article.

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