ECONOMY

172 coalition government
immediate payoff) parties could wait for political-economic circumstances associated
with a higher expected government duration.
One of the appealing features of both the Morelli and Merlo and Wilson
approaches is their close connections to the data. Morelli’s approach, for example, is
motivated by the so-called Gamson’s Law which states that cabinet portfolios among
the members of the ruling coalition should be allocated in proportion to their (normalized)
seat share (Gamson 1961). 22 Models based on Baron and Ferejohn (1989)
cannot account for this regularity since they imply a proposer premium regardless
of the distribution of seats. Morelli’s model, however, does imply Gamson’s Law if
proposer selection is done proportionally to seat share. 23
Merlo and Wilson’s (1998) model also implies portfolio distributions close to
Gamson’s Law provided the negotiating parties have low discount factors—i.e. if they
are very patient. If parties are impatient, however, proposers are able to capture higher
payoffs. 24
Adifferent variant of efficient bargaining third was recently proposed by Baron and
Diermeier (2001). Their model focuses on an environment where parties bargain not
only over distributive benefits, but also over (multidimensional) policy. The model
proceeds as follows. A proposer party (“formateur”) is selected proportionally to seat
share. That party then selects a “proto-coalition” (Axelrod 1970), i.e. a list of parties
that agree to negotiate under unanimity rule. If the proposed coalitional agreement
fails to win a majority in the chamber, a caretaker government implements an exogenously
given status quo policy. Bargaining within a proto-coalition is efficient
and leads to a unique policy outcome for each proto-coalition. 25 The intuition is
that during proto-coalitions parties can make side payments to each other using
the distributive benefits. This ensures that no matter how the bargaining process is
structured, the parties must agree on the same efficient policy. 26
In contrast to previous bargaining models, the policy location does not depend
on the details of the bargaining process such as recognition probabilities or discount
factors. It only depends on the ideal points of the members of the proto-coalition.
This allows Baron and Diermeier to embed their coalition formation model into
a more complicated, full equilibrium, model that includes an election state under
proportional representation 27 as well as analysis of policy dynamics across legislative
periods.
²² See also Browne and Franklin 1973; Browne and Fendreis 1980; SchofieldandLaver1985;Laverand
Schofield 1990.
²³ Diermeier and Merlo 2004 provide evidence that formateurs (i.e. proposers) are indeed selected
proportionally.
²⁴ The Morelli and Merlo–Wilson approach has led to an empirical re-evaluation of the data
underlying Gamson’s Law. The key question is whether the data show a proposer premium. See Warwick
and Druckman 2001; Ansolohabere et al. 2003; Frechette,Kagel,andMorelli2004.
²⁵ For an empirical test of the Baron–Diermeier model and other coalition models see Carrubba and
Volden 2000.
²⁶ If preferences are assumed to be quadratic, that policy is the centroid of the parties’ ideal policy
locations.
²⁷ See Austen-Smith and Banks 1988 for an electoral model under proportional representation that
uses a simplified version of sequential bargaining.