WHY DO POPULIST OUTSIDERS GET ELECTED? THE A.B.C. OF POPULISM. Sebastian J. Miller* University of Maryland

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1 DAT: DO NOT CICUATE WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. Sebastian J. Miller* University of Maryland miller@econ.umd.edu This Version: January 5, 007 Abstract The existence of populist regimes led by outsiders is not new in history. In this paper a simple framework is presented that shows how and why a populist outsider can be elected into the government, and under what conditions he is more likely to be elected. The results show that countries with a higher income and wealth concentration are more likely to elect populist outsiders, than countries where income and wealth are more equally distributed. It is also shown that elections with a runoff also are less likely to bring these candidates into office. Keywords: Outsiders, Populism, Campaign Contributions JE: TBC * I wish to thank Allan Drazen and participants at the graduate economics seminar of University of Maryland for very helpful comments.

2 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM.. INTODUCTION There is a long history of populist governments in atin America and elsewhere. A few fairly recent examples include: Peru , Ecuador , Venezuela 999- present, Argentina 003-present, Italy , and Thailand , amongst others. These governments share many things in common. They share the fact that they come into power through the democratic system in fair elections. However many of them have to leave office before the end of their constitutional term, since usually by the end of the terms the situation in the country is [much] worse off than when it began Dornbusch and Edwards 989. Another commonality in many cases, especially in some recent governments in atin America, is that the elected government is not only a populist one, but it is also led by an outsider. An outsider is a candidate that runs for office that is not part of the traditional party system in the country. ecent examples of outsiders in atin America would be Alberto ujimori and Ollanta Humala in Peru, ucio Gutierrez in Ecuador and Hugo Chavez in Venezuela. The governments of ula Da Silva in Brazil, Evo Morales in Bolivia and Tabare Vasquez in Uruguay are harder to classify them as purely outsiders. In each of these cases the party or parties that support these candidates have long been part of the political establishment even though they might have had very little power. Moreover, in each of the former examples, the coalitions were built around the candidate himself, while in the latter it seems that the coalitions were there first, and then they choose a candidate. Populists and outsiders are also more likely to arise where democracy is weak and or its perception is that it does not work well. Democracy in atin America is perceived overall as weak, with high levels of corruption, little or no accountability, and unequal distribution of rights Tedesco, 004; Taylor, 004. There is also evidence that politics in atin America are driven by Client-ship relations. In this sense there are groups special interest, elites or others that are organized to obtain favors in exchange for their

3 SEBASTIAN J. MIE political support. This kind of relations have been documented to arise both in democratic or non-democratic regimes Taylor, 004. Populist governments or movements though are also far from exclusive to atin America. Both Mussolini and Hitler were considered populists in their time, as was Huey ong in the US. Moreover, during the 960 s and 970 s leftwing populist movements were quite powerful throughout Europe. Currently in Europe the populist movements are closer to the right-wing agenda though. A few current examples would be Berlusconi in Italy, e Pen's party in rance or the late Pim ortyun's in the Netherlands Mudde, 004. Some analysts also suggest that Amadineyad in Iran would also fall into this category. The rise of outsiders also occurs in the developed world where they have been elected and more recently have or could have affected the outcomes of elections. ecent cases in the US that are worth mentioning are independent candidates ose Perot and alph Nader in the 99 and 000 presidential elections respectively Abramson, et. al., 995. e Pen in rance also affected the outcome of the 00 presidential election. It is not so easy to explain why populists and outsiders are elected once we assume voters are rational. In order to get voters to elect these candidates even knowing the risk faced by their election, voters must have some sort of preference for these candidates. I will pose that outsiders are elected or brought into the system due to a failure to deliver welfare improvements by the insiders i.e. the traditional parties. This may be explained by insiders being captured by the elites or certain special interest groups. Moreover, this failure enables the outsider to rise that does not face credibility issues at least not from being in power previously, and therefore he can make more promises that he may not be able to fulfill than the traditional parties can. In this paper I will explore the following questions. Why are populist outsider candidates elected, over and over again, even when their governments are less than successful? How and why outsiders become part of the political game? How can they exist in equilibrium? The rest of the paper is organized as follows. In section I will review the literature on 3

4 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. populism in order to end with a working definition of it. Section 3 presents a model of political competition between insider parties and a populist outsider. Section 4 presents the basic results of the model. inally Section 5 concludes.. WHAT IS O DO I MEAN BY POPUISM? Perhaps one of the hardest tasks in political science and economics is to find a good definition of populism. It is often used and confused for demagogy. Mudde 004 distinguishes two dominant interpretations of the term populism. The first refers to an emotional and simplistic discourse, that is directed at the gut feelings of the people. Mudde, 004. The second interpretation refers to opportunistic politicians/policies that aim to rapidly please the people/voters. In a way this could represent a politician only concerned in short-run political advantages eg. lowering taxes just before elections. However both these definitions are far from comprehensive and they do not capture the full sense of what is typically known as a populist government/movement. Therefore Mudde defines populism as an ideology that considers society to be separated into two homogeneous and antagonistic groups, the pure people versus the corrupt elite Mudde, 004. This definition is consistent with definitions that call populism to impose the general will of the people in a way such as the tyranny of the majority and contrast with the idea of democracy as a bargaining process Crick 005. The term populism originates from the Populist Party in the United States in the late eighteen hundreds, circa Szasz, 98. This movement grew originally as a response to economic hardship during the period of in the agriculture states of the south and western United States. The movement was composed at first by small farmers on the north south axis that goes from eastern Montana and the western Dakotas to New Mexico and Texas. 4

5 SEBASTIAN J. MIE The party gained momentum given the feeling of disconnection between the rural farmers issues and the parties in Washington. This attracted new voters and hence the party ran on issues that ranged from prohibition, to direct election of senators, to women suffrage and supervision of large corporation by federal government and others. They had two common denominators i they wanted to restore the power to the people and ii they were driven by demands for social change derived mainly from the economic depression of Szasz, 98. In the political science literature populism has usually been used to describe the regimes that governed atin America in the middle of the twentieth century. Conniff 98, 999 describes the atin American version of populism as a grand coalition of workers and industrial bourgeois led by a charismatic leader. The populist runs under a platform of reform, usually running against the local elites that own the land, with promises of either: i new jobs and higher wages via industrialization of the country; or ii political reform and political access to disenfranchised groups e.g. free and fair elections, women right to vote, universal suffrage, etc. This model fits pretty well for most so-called populist until 960 s, from Yrigoyen and Peron in Argentina, Alessandri, Ibañez and the Popular ront in Chile to Haya de la Torre in Peru, azaro Cardenas in Mexico and Vargas and Goulart in Brazil. It is worth noting that another common denominator in all these cases was that these coalitions were an alternative response towards the threat of socialism or more precisely communism in many countries. The main goal of the movement was to transition towards a modern society in which landlord elites would eventually give up power to the industrial bourgeois while the urban industrial workers would have better paid jobs, higher incomes and consequently a better life. It is important to state that inequality more than poverty played a fundamental role in setting the conditions that allowed the coalition The other case of populism in the US usually refers to Huey ong, the Governor and Senator from ouisiana that would have ran for president in 936 but was killed before he had the chance. His main political agenda was the restitution of a nation of equals, and proposed for example a guaranteed universal minimum income, 00% taxes on all income over million and over inheritances over 5 million Szasz 98. The list of potential populists is very large indeed; they include candidates from most atin American countries including Argentina, Brazil, Chile, Ecuador, Mexico, Panama, and Venezuela. 5

6 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. to be built, since the main goal was to redistribute power and/or income. Dornbusch and Edwards 989 and Sachs 989 also stress that poverty and income inequality played a significant role in run up to elections where populists came in power. Dornbusch and Edwards 989, 99a henceforth D&E, described the concept of economic populism or more precisely macroeconomic populism as a government that prioritizes income redistribution policies over efficiency and growth policies 3. However in their own description of the populists governments in Chile under Allende and Peru under Garcia, they explain that these governments were elected in part to respond to dissatisfaction with growth performance, high levels of poverty, and unequal distribution of income. They also recognize that the economic teams that took office in the government wanted to achieve growth with redistribution. According to D&E the main reason that the populist program failed was bad economics, since according to them policymakers did not to recognize that their program was infeasible. The issue is that their assumptions about idle capacity, decreasing long-run costs and inflation were wrong. It is interesting to note that even if D&E are right about the failed nature of the economic programs of both governments, when the government was campaigning for office it actually believed that the program was achievable. It might be the case that the party running for office had bad economists, but they cannot be portrayed as mere opportunists; they really thought that they could achieve both high growth and a more equal society. In this sense it might be the case that they were too naïve, or more precisely, that their policies may have had a chance to succeed but they didn t 4. 3 Stokes 999, 00, uses basically the same distinction, but she names them, security oriented policies versus efficiency oriented ones. 4 An interesting comparison that comes to mind is that of export-led growth EG versus industrialization by substitution of imports ISI policies since the 960 s. When looking at the data we observe that countries that undertook ISI policies grew faster than countries that undertook EG during the 960 s and 970 s while this was reverted since the 980 s Carbaugh, 005. Consequently when asked in the late seventies about the best strategy for growth it might have been the case that EG policies were not the first choice. 6

7 SEBASTIAN J. MIE Kaufman and Stallings 99 describe populism as the economic policies to achieve both political and economic goals. According to their definition these governments rely on the following policies to achieve their goals: price controls, income redistribution and run fiscal deficits. or example for Chile they identify two periods: Ibanez 5-58 and Allende However, Drake 99 argues that Allende does not fit the pattern in the sense that their policies went much further, since it was not only income redistribution, but also redistribution of property and more generally wealth. Drake 99 argues that even though the programs of socialists and populist overlapped many times, in the case of Allende it was the former that predominated rather than the latter. Another important feature of populism was charisma Conniff 98, 999. Within the political science framework we could call this quality of the politician. Not all populists were elected most notoriously Haya de la Torre in Peru, and many elected ones ended their government before time, usually in some sort of political crises. But one common denominator was that most if not all populist were able to bring the masses towards them and lead them to the poles. In the more recent literature Weyland 999, 00 describes what he defines as neopopulism, which is a combination of neoliberal policies and a populist leader. The main exponents of this strand were ernando Collor de Melo in Brazil, Carlos Menem in Argentina, Alberto ujimori in Peru and Carlos Perez in Venezuela. All of these have in common that they ran as populists and later enacted neoliberal reforms 5. It is worth noting though that Collor de Melo ran on a neoliberal platform while the rest actually ran closer to a left-wing platform and once elected enacted neoliberal reforms. According to the liberal populism literature oberts, 995, this was possible given that social institutions were weak and allowed for a clientelistic approach by the charismatic leader, and this would be populism. Choi 005 explores a similar argument for the recently 5 According to Stokes 999, 00 these are actually policy switchers. At least in the case of Menem, according to Stokes, they only ran a left wing platform to be able to win, but they always had planned to undertake neoliberal reforms. This would in turn be a case of opportunistic politicians that lie in order to be elected. There is a narrow line between this and a demagogue. 7

8 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. overthrown government in Thailand and concludes that the populist government in Thailand has its origins in the inequality of country rather than an institutional issue. All of the above said it is time to define what I will understand as a populist. I will define a populist as a politician that has the following four characteristics: i. ii. iii. iv. As a politician behaves opportunistically, this is cares about being in power, but uses elections to achieve his goals. He targets certain groups to rally around him. He promises redistribution of income, wealth or power to the groups in the coalition. He is a charismatic leader, and uses his charisma to get votes. Out of the four characteristics, the latter one is the one that makes him really different from a traditional politician. The idea is that populists use their charisma to attract voters, instead of using other formal political mechanisms. This is, he will not care about SIGs that may contribute money to his campaign, since he would not use it. 3. THE MODE Voters This model will have two types of voters. irst we will have a fraction - of impressionable voters modeled in the spirit of Baron 994. These will be a continuum of voters of mass - that are distributed uniformly in preferences for policy platforms, along the [0,] interval. or tractability I will assume that a platform is onedimensional. These voters care about three things: policies implemented by the winning candidate, quality of the candidate and going to the polls. Voters thus have the following utility function if they decide to vote: U i vote θ k k = Max k i k M i c, where c i is the cost of voting for voter i, which for now I will assume constant and equal to c, i and 8

9 SEBASTIAN J. MIE k are the most preferred platform for voter i and the announced platform by candidate k respectively 6,7. If the voter does not vote his Utility is U i no vote=0. is an increasing and concave function and M is the contribution received by k that will depend on the announced platform k, while θ k is a random variable representing the charm or appeal of the candidate. represents a mapping from charm or advertising into perceived quality. I assume that quality in itself is not observable, but charm and money expenditures are; and charm and money are positively correlated with quality of the candidate. In this model not all voters cast their vote 8. Candidates will need either charm or money or both to get voters to vote. Charm will be an exogenous factor while money will depend on campaign contributions by nonimpressionable voters 9. I assume that there is a fraction of these voters that contribute funds to the campaign of either candidate, depending on the proposed platform and their preferences. All contributor voters contribute a fix amount of money M to one candidate. These voters are distributed uniformly in an subset of the continuum [0,]. urthermore I will assume that their distribution is skewed with respect to the median platform. or simplicity I will assume the distribution to be skewed to the right of the median voter. 6 The preferences laid here are similar to those proposed by Schachar and Nalebuff 999 in the sense that candidates can exert use money to influence voter turnout. They are also standard in the public choice literature where voters derive utility from winning. Consider the same preferences but modified in the following way U=pBd-c, where c is the cost of voting, d is the benefit from voting and B the benefits from the candidate winning the election and p is the probability of being the pivotal voter. Now assume B=ωd, then U=Bpω-c. We also know that p 0 in any large election, so we can still accommodate these preferences in the traditional public choice literature. 7 The cost of voting may include the registering process, work days lost and/or other costs. Therefore it may vary across individuals or groups. In particular it could account for disenfranchised groups e.g. poor voters, racial minorities, etc.. Nevertheless I will assume it is constant for the time being. 8 In this context I am also including candidates with high charisma/charm and significant expenditure. Higher charm would attract voters to the polls, and campaign expenditures are assumed to better convey the message. This is, candidates with low expenditure cannot convey their positions so clearly as candidates with higher expenditures. We are modeling campaign expenditures as informative about the quality of a candidate in the spirit of Coate 004 and Prat We could also think of these as SIGs in the spirit of Grossman and Helpman

10 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. - impressionable voters m 0 0 c -β c c β igure : Voters Characteristics Contributor voters Contributor voters participate in two stages. In the first stage they decide to contribute M to the party that proposes a platform closest to their own. In the second stage they vote for whoever they contributed. Contributor Voter j decides to contribute M j according to the following rule: M,0 if M j, = 0, M if M M, if j j j j < j > j = In the second stage these voters vote in the same way as they contributed. Under these assumptions, party will obtain contributions in the amount of M M C = β β and party will then obtain:, if this is an interior solution. Otherwise we may obtain M =M and M =0, or M =0 and M =M. M = M M Candidates/Parties There are two parties, that only care about being in power. Each party draws a candidate with a given amount of charisma θ or θ simultaneously and independently which is private information, and they announce a platform henceforth or by 0

11 SEBASTIAN J. MIE which they run. There is a third populist candidate drawn by nature, endowed with charm θ. θ k is drawn in each case from a distribution with CD Ωθ k k, θ [ 0,. 0 Assumption no crossing over: I will assume that the following condition is always true:. This is party will always choose a platform to the right of party or equal to party and vice versa. This assumption is used to rule out left wing platforms by right wing parties and is it useful to simplify the analysis. We can have convergence but no crossing over. The parties' problem is therefore to choose their platform k, to maximize their probability of being elected which can be defined for as: Pr is elected = prob V > V prob V > V ; where Vk is the fraction of votes that candidate k receives. This will be the sum of votes by impressionable V I C and non impressionable voters V. rom impressionable voters, k receives V I k = dg = G G. Where and represent the voter that is indifferent between two candidates or a voter that is indifferent between voting or not, or a corner voter 0 or and G is the CD of the impressionable voters. Nonimpressionable voters vote according to their contributions and therefore they split between and in the same fractions as they split contributions. Thus, C V C = β, and β V C 3 C = V. inally total votes for C I candidate k will be V k = V k V k. Timing 0 I will assume that the populist in general chooses a platform to the left of,. The case for a right wing populist will be analogous, but with the roles of party and reversed. Defining these for and the outsider is straightforward. I have defined a more general case for the distribution but I will still assume a uniform distribution. 3 This is the result of the interior solution. or corner solutions V C =0 or, and consequently V C = or 0 respectively.

12 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. The timing of events is as follows:. Party candidates are drawn by nature.. Parties announce their platforms and. 3. Contributor voters contribute to either party candidate. 4. An outsider is drawn by nature with θ, and chooses his platform without observing contributions for other candidates in order to maximize his votes. 5. Elections are held, voters vote sincerely and the candidate or party with more votes wins and takes office. Definition : A political equilibrium in this model consists in a pair of strategies θ, θ such that each party maximizes its expected votes considering the expected θ, and the other party s platform. The concept of equilibrium is Perfect Bayesian Equilibrium PBE. We can easily observe that the platform choice of each party will depend on the charisma of the candidate. This is the more charisma the candidate has, less money he will need to "buy votes". The result arises from the fact that charisma and money are perfect substitutes. or candidate, his share of votes will be determined by the following expression 4 : C V = β β c rom assumption we know that will always set its platform the same as or to the right of. Given, why would choose something to the right of? Well, choosing to the right of will have two effects. irst will obtain fewer resources since it is 4 I am assuming that party does not reach further than voter with i =. If he does, then he would try to move as far to the left as possible, in order to increase his votes on that side, of course up to C.

13 SEBASTIAN J. MIE straightforward to note that 0 4 < = β M M. Moreover candidate will also lose non-impressionable voters also since 0 4 < = β V N. However, candidate could gain votes from his left side by moving away from the platform. The net effect will depend on the amount of charisma θ, and other parameters. In particular we have: = ' 8 ' 8 4 M c c M V β β β The first term corresponds to the non-impressionable voters that loses. The first term in brackets correspond to the voters loses due to lower money. inally the last two terms in bracket correspond to the voters wins to the left of his platform when he separates from, leaving a gap between them. rom the above expression and taking as given, β, c, M, θ,, we can find, such that, will be increasing in θ θ ~ θ θ ~ > θ. This will be valid over some range of platforms and depending on the precise shape of. By the same token, θ θ ~, 5 C θ =. Proposition charisma leads to extremism: The more charisma a party candidate has, the more he or she will move to the extreme. This is charismatic leaders in both parties will choose platforms to the left and right of the median contributor. Proof: By simple inspection I can show that having a higher θ or θ leads to choosing a platform to the left and right of C respectively. Since more charisma compensates for less money. 5 In fact the optimal strategy would be, but this could violate assumption since it could be the case that in expectation party chooses a value to the left of θ = C, and later party choose C. 3

14 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. Corollary : Money only candidates converge to C. If party candidates do not have charisma or cannot use it, then they will converge to the platform of C. Proof: This is a direct consequence of proposition. et s now consider party. The only interesting case is when there is a voter indifferent between and the Outsider. If this set is the empty set, then the analysis is exactly the same as for, but in the other direction. Party then will obtain the following share of votes: = O O V C β β ollowing the same analyses done for Party, I can now look at the effect of given a certain platform, moving slightly to the right or left. Therefore I calculate the following derivative: = ' 8 ' 8 4 O O O M M V β β β With some algebra we can also find values for which there will be aθ ~, such that θ θ ~ >, will be decreasing in θ θ. This will be valid over some range of 4

15 SEBASTIAN J. MIE ~ platforms and depending on the precise shape of. By the same token, θ θ, θ = C. Note however that the exact effect of moving the platform will not only depend on the value of s own θ, but also on the value of θ. The higher the θ is, will decrease the benefits from moving to the left for. Given these assumptions we can now solve for the outsider. In the next proposition I will find the optimal strategy of the outsider, given his information set. By construction I have assumed that outsiders do not have access to contributors. Therefore their optimal strategy will be to get as many impressionable voters as possible. The share of votes for the left-wing outsider is given by the following expression: θ e θ V = min, max, 0 c c Where e satisfies the following condition: e e = O. e Therefore = O O, and the objective function of the outsider is to maximizes his expected votes, given his known charisma and his beliefs from the platforms of parties and will choose. The leads us to proposition. Proposition : It is very simple to show that an optimal strategy for the outsider is to set a platform such that corner voter 0 is just indifferent between voting and not. et this platform be *. This platform is the best response given the strategies set by the insider candidates. Proof: By simple inspection I can show that choosing * will yield the highest possible share of votes for the outsider given the strategies of the other candidates. Assume the outsider chooses a platform slightly greater than *, **=*ε. The indifferent voter on the left side is given by the following condition: 5

16 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. i θ θ = * ε = ** c c, but the indifferent voter under * is zero, so θ we know that 0 = * c, therefore i = ε > 0. By moving to the right of *, the outsider loses a fraction ε>0, of voters. On the right side the indifferent voter now is given by the following condition: θ e, j = min * ε, where e represent the indifferent voter between the c outsider and the candidate from party. If both candidates do not intersect voters then the candidate gains the same fraction of votes than the ones he lost on the bottom side. Conversely if they do intersect, then the outsider will lose a fraction of votes to the candidate. inally if the outsider chooses a platform slightly to the left of *, such as ***=*-ε, then his voting share will be reduced, since the indifferent left side voter will be less than zero, this is i = ε < 0. On the right side, he may gain a fraction of voters if his votes were intersecting with candidate 's voters, but he would earn fewer votes than the ones he lost on the HS. If e was not active, then he would only lose votes. Therefore choosing * is the best response and given the strategies by insiders, dominates all other strategies. This strategy will imply that in general *< m. This is the outsider will choose a platform to the left of the median voter. Theorem : Centrist populists. Although most populist will be extremists, we can show that the more charisma a populist has the more he can move towards the center. 6

17 SEBASTIAN J. MIE * c θ Proof: Just by observing the fact that * O c c calculate = > 0 θ θ =, we can. Therefore more charisma will mean the populist can build a bigger coalition, and this will be done by a choosing a more centrist platform. 4. ESUTS AND ANAYSIS The simple framework exposed above yields some interesting insights in the results of elections. The composition of the electorate will matter in determining who wins the election. Proposition 3: An increase in the fraction of contributor voters reduces the probability of election of an outsider. Proof: rom the expression for e we can take the derivative with respect to. So e K that, = K O, where K=, and so the sign of e will be the same as the sign of K, and this yields, K M O = 4β ' C β < 0, so long as the medium point between and is a contributor, and since is an increasing function. Therefore an increase in the share of rich voters may reduce the share of votes the outsider will receive if there are voters that would be willing to vote for either candidate but one in this case the party offers now a higher payoff to the voter. Corollary : A country with higher concentration of wealth is more likely to elect outsiders than a country with more equal distribution of wealth. 7

18 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. Proof: It follows directly from proposition 3. If we assume that a small implies that wealth is more concentrated than a larger. This result arises from the fact that a higher concentration reduces total contributions, and therefore the share of votes by insiders. An alternative view suggests to keep M constant and then allow to move but keeping total contributions constant. In this case there is still a reduction in the probability of electing an outsider with higher. However the effect now comes from the fact that a higher implies that there are fewer impressionable voters that the outsider can lure towards, and therefore his base is reduced, and consequently his share of votes as well. The model predictions are explained basically by the following issues. The first issue to consider is the constraints faced by both insiders and the outsider. Insiders are constrained in their platform choices, since they need to obtain contributions to finance their campaign. In this context both parties fall in a trap, where even if they wanted to move further towards the median voter, they would lose contributions and hence they would not be able to get out their message. The issue is that insiders finally care more about contributions than about the citizen's preferences, and this arises from the fact that without money they cannot run a campaign. On the other hand, the outsider is constrained by his endowment of charisma, charm, etc. He is free to choose any given platform, but cannot control his endowment. He chooses the platform that yields him the highest possible share of votes, but this is not always enough to get elected. Now let's consider the following variation in the game presented above. We will add an additional stage in the model, just before elections, where parties could agree to share government in some way 6. In this scenario the results we obtain will depend on certain assumptions we make on what can each party do. I'll assume that once a candidate 6 Alternatively, we can think of this as assuming there is a runoff between the outsider and one of the other two parties. 8

19 SEBASTIAN J. MIE chooses his platform, he cannot deviate from this commitment. This assumption follows from a credibility issue. In this sense, it can be argued that a candidate would be accused of "flip-flopping", lose his credibility and consequently potential voters if he changes his platform. Under these conditions we can posit the next two results. Proposition 4: If one party/candidate drops out of the election, the probability of electing an outsider is reduced. Proof: It follows from the share of votes each party receives, where now the centrist party will get the votes from both sides and, such that his share V C will C c C c C e be given by V min, max, c = 7, while the populist outsider still gets the same amount of votes he got previously. c Corollary 3: A country with a runoff election has a lower probability of choosing an outsider, than a country with a plurality rule. Proof: It follows directly from proposition if we assume that a runoff is equivalent to having a candidate dropout of the election. Now I will consider another variant. et's assume that for some reason there is only one strong party running for the election, such as a grand coalition of parties. In this new game it is very easy to prove that the platform of this party would be closer to the median voter 8. ich voters will only contribute to this grand-coalition, so they can run a campaign closer to the median voter without losing contributions. Now this does not preclude the outsider from winning. Under certain draws of θ, the outsider might still be able to get more voters out to the poles than an insider, even if he runs with the median voters' most preferred platform. However in this case the ex-ante probability of choosing an outsider is reduced. 7 C C Note that C = θ M, where M C may include donations from both and or alternatively only the donations that or had before the other candidate dropped out. 8 In the limit, both candidates should run under the median voter's most preferred policy platform. 9

20 WHY DO POPUIST SIDES GET EECTED? THE A.B.C. O POPUISM. 5. CONCUDING EMAKS In this paper I have presented a simple model of political competition in which two parties and an outsider run for office. The main result of the model show under what circumstances is an outsider more likely to succeed. I have shown in a simple framework how income distribution and electoral institutions can play a role in facilitating or not the election of populist candidates. EEENCES Abramson, P., J. Aldrich, P. Paolino and D. ohde 995 "Third-Party and Independent Candidates in American Politics: Wallace, Anderson and Perot" Political Science Quarterly Vol. 0 No 3, pp Baron, D. 994 Electoral Competition with Informed and Uninformed Voters American Political Science eview Vol. 88, No, pp Carbaugh,. 005 International Economics 0 th earning. Edition, South-Western Thomson Choi, J. 005 Economic Crisis, Poverty and the Emergence of Populism in Thailand Journal of International and Area Studies, pp Coate, S. 004 Pareto Improving Campaign inance Policy American Economic eview, Conniff, M. 98 atin American Populism in Comparative Perspective, The University of New Mexico Press, Albuquerque. Conniff, M. 999 Populism in atin American, The University of Alabama Press, Albuquerque. 0

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