Portfolio Allocation as Leadership Strategy

139 Pages·2010·1.49 MB·English

Portfolio Allocation as Leadership Strategy:
Bargaining among and within Parties
by
Yoshikuni Ono
A dissertation submitted in partial fulfillment
of the requirements for the degree of
Doctor of Philosophy
(Political Science)
in The University of Michigan
2010
Doctoral Committee:
Professor Arthur Lupia, Chair
Associate Professor William R. Clark
Associate Professor Anna Grzymala-Busse
Assistant Professor Daisuke Nakajima
Associate Professor Orit Kedar, Massachusetts Institute of Technology
(cid:13)c Yoshikuni Ono 2010
All Rights Reserved
PREFACE
This dissertation, entitled Portfolio Allocation as Leadership Strategy: Bargaining
among and within Parties, sheds new light on the way cabinet portfolios are allocated
among political parties as well as party factions. In parliamentary democracies, cab-
inet ministers hold very important positions, because they make policies and oversee
the implementation of policy on behalf of the government, while at the same time
retaining the support of a parliamentary majority. When no single party solely con-
trols a majority in the legislature, a group of parties forms a coalition government
and decides which party gets which portfolios in the cabinet. Since the number of
cabinet ministers is limited, the allocation of these positions also poses one of the
most difficult decisions in coalition politics.
In the existing literature on coalition governance, some argue that cabinet portfo-
lios will be allocated proportional to a party’s seat share in the coalition (Gamson’s
law), while others argue that the formateur party—the party formally given the first
opportunity to build a coalition and typically the party from which the prime min-
ister hails—will get a share that is more than proportional to its seat share. As I
show in Chapter 2 of my dissertation, however, I have obtained empirical evidence
that contradicts both theories. In most coalition governments in Western Europe,
prime ministerial parties actually receive fewer portfolios than they should under the
aforementioned theories. Moreover, these allocation outcomes vary considerably over
time and across countries.
Whydoprimeministerialpartiesacceptweakerpositionsthantheirparliamentary
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representation would imply? The observed patterns suggest that cabinet portfolios
are not merely prizes for coalition formation in the parliament. In order to explain
the considerable variation in portfolio allocation across countriesand over time within
countries, in Chapter 3, I bring a new perspective to the study of portfolio allocation
bydrawingparticularattentiontotheprocessofmanagingacoalitiongovernment. At
the heart of this work is a theoretical framework that accounts for portfolio allocation
as a product of a prime minister’s “political strategy.” The framework builds from
a core premise: the prime minister of a coalition government is concerned about
productive policy-making as well as the long-term survival of the government. These
concernsaffectthebargainsthattheprimeministerwillchoosetostrikewithpotential
and existing coalition partners. And in conditions that are often satisfied in Western
Europe, these concerns will lead the prime minister’s party to accept fewer portfolios
than prevailing theories would predict.
From this framework, I develop a game-theoretic model in Chapter 4 that articu-
lates the circumstances under which the prime minister of a coalition government is
likelytosurrendervariousnumbersofportfolios. Incontrasttothepreviousliterature
on portfolio allocation, which focuses exclusively on the factor of coalition formation,
this theoretical model also takes into account the effect of the cost of coalition gover-
nance that the prime minister has to bear in the process of managing the coalition. I
then evaluate the model’s predictions in Chapter 5 by drawing on data from coalition
governments in thirteen Western European countries. The empirical work demon-
strates that the prime minister’s party surrenders more cabinet portfolios not only as
its bargaining power in assembling a coalition declines, but also as the policy prefer-
ences of coalition partners become more divergent. These findings strongly support
my argument that the prime minister uses portfolio allocation as an instrument to
defuse tensions among coalition partners as well as to reward them for joining the
ruling coalition. Moreover, the results also explain why the share of portfolios given
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to the prime minister’s party reflects neither proportionality nor formateur advantage
in most Western European countries. The prime minister often surrenders portfolios
to junior partners because of the need to put together a stable, functional coalition.
Bargaining over cabinet portfolios also takes place within parties because many
parties have internal divisions or factions that influence these decisions. Therefore, I
further extend my theoretical framework in Chapter 6 to explain portfolio allocation
within parties by examining a case in Japan where highly institutionalized factions
have existed in the ruling party—the Liberal Democratic Party (LDP)—for over more
than forty years. The LDP is an excellent case for analyzing portfolio allocation
amongfactionsbecauseitslongtenureinpowerallowsustocontrolforpartystatusin
the government. The findings show that substantial variation in allocation outcomes
has occurred between elections and without a change in the LDP’s status as ruling
party. I argue that this variation is because party leaders act similarly to prime
ministersincoalitiongovernmentsinallocatingportfoliosamongfactionsstrategically
to prevent defections and challenges from internal rivals; therefore, their factions
surrender more portfolios as they become more vulnerable to challenges posed by
internal rivals. The resulting portfolio allocation reflects the bargaining dynamics
within the party and affects the extent to which party members are willing to behave
in a disciplined manner in the parliament.
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TABLE OF CONTENTS
PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
CHAPTER
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Research Questions . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Previous Literature on Portfolio Allocation . . . . . . . . . . 3
1.3 Patterns of Portfolio Allocation . . . . . . . . . . . . . . . . . 5
1.4 Portfolio Allocation as Leadership Strategy . . . . . . . . . . 8
1.5 Outline of the Dissertation . . . . . . . . . . . . . . . . . . . 11
II. The Empirical Regularity of Portfolio Allocation: Reconsid-
ering “Gamson’s Law” . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Relationship between Portfolio Shares and Seat Shares . . . . 15
2.3 Coalition Payoffs: Weighted Portfolios or Cabinet Membership 22
2.4 Bargaining Resources: Parliamentary Seats or Voting Weights 29
2.5 Summary of Findings . . . . . . . . . . . . . . . . . . . . . . 35
III. The Politics of Portfolio Allocations: Coalition Management
and the Distribution of Coalition Payoffs . . . . . . . . . . . . 37
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.2 Politics after the Formation of a Coalition Government . . . . 39
3.3 The Prime Minister’s Role in Managing the Government . . . 42
3.4 Cabinet Portfolios and Effective Governance . . . . . . . . . . 43
3.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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IV. A Model of Portfolio Allocation: Coalition Management and
Cabinet Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.2 Motivations of Players . . . . . . . . . . . . . . . . . . . . . . 51
4.3 Sequence of Events . . . . . . . . . . . . . . . . . . . . . . . . 53
4.4 Equilibrium Strategies . . . . . . . . . . . . . . . . . . . . . . 54
4.5 Comparative Static Predictions . . . . . . . . . . . . . . . . . 56
4.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
V. Empirical Analyses of Portfolio Allocation: Testing the The-
oretical Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.2 A Hypothesis for Empirical Analyses . . . . . . . . . . . . . . 61
5.3 Data and Measurements . . . . . . . . . . . . . . . . . . . . . 65
5.4 Results of the Empirical Analysis . . . . . . . . . . . . . . . . 70
5.5 Summary of Findings . . . . . . . . . . . . . . . . . . . . . . 74
VI. An Extension to Intra-Party Bargaining: Portfolio Alloca-
tions among Party Factions in Japan . . . . . . . . . . . . . . . 77
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.2 Contending Perspectives and Questions on Portfolio Allocation 81
6.3 Leadership Strategy and Portfolio Allocation . . . . . . . . . 86
6.4 Data and Measures . . . . . . . . . . . . . . . . . . . . . . . 91
6.5 Analysis and Findings . . . . . . . . . . . . . . . . . . . . . . 99
6.6 Robustness Tests . . . . . . . . . . . . . . . . . . . . . . . . . 107
6.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
VII. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
7.2 Findings and Implications . . . . . . . . . . . . . . . . . . . . 114
7.3 Directions for Future Research . . . . . . . . . . . . . . . . . 118
BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
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LIST OF FIGURES
Figure
1.1 Difference between Prime Ministerial Party’s Portfolio Share and Its
Seat Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Relationship between Portfolio-share and Seat-share . . . . . . . . 16
2.2 Proportionality of Allocation Outcomes . . . . . . . . . . . . . . . 17
2.3 Relationship between Portfolio-share and Seat-share (separated) . . 18
2.4 Proportionality of Allocation Outcomes (separated) . . . . . . . . . 19
2.5 Relationship between Portfolio-share and Seat-share (box-plots) . . 20
2.6 Relationship between Portfolio-share and Seat-share (Junior Parties) 21
2.7 Relationship between Weighted portfolio-share and Seat-share . . . 23
2.8 Total Number of Coalition Payoffs . . . . . . . . . . . . . . . . . . 27
2.9 Relationship between Membership-share and Seat-share . . . . . . 28
2.10 Relationship between Portfolio-share and Voting weight-share (all
coalitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.11 RelationshipbetweenPortfolio-shareandVotingweight-share(Minimal-
winning coalitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.1 Extensive Form of Two-party Game . . . . . . . . . . . . . . . . . 54
4.2 Prime Ministerial Party’s Predicted Portfolio Share . . . . . . . . . 57
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5.1 Relationship between Prime Ministerial Party’s Portfolio Share and
Two Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.2 Prime Ministerial Party’s Predicted Portfolio Share . . . . . . . . . 75
6.1 Portfolio Allocation among Factions within the LDP . . . . . . . . 84
6.2 Likelihood the Party Leader will Face Challenges from Internal Rivals 91
6.3 Party Leader Faction’s Predicted Portfolio Share . . . . . . . . . . 105
6.4 Rival Faction’s Predicted Portfolio Share . . . . . . . . . . . . . . . 111
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LIST OF TABLES
Table
2.1 Total Number of Cabinet Portfolios . . . . . . . . . . . . . . . . . . 25
2.2 Total Number of Cabinet Members . . . . . . . . . . . . . . . . . . 26
2.3 Regression Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.4 Regression Results (Minimal-winning coalitions) . . . . . . . . . . . 34
5.1 EffectsofOutsideOptionandPolicyDivergenceonPrimeMinisterial
Party’s Portfolio Share . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.1 Relative Importance of Cabinet and Party Executive Positions . . . 95
6.2 The Number of Portfolios Allocated to Factions (by Seniority) . . . 96
6.3 Effects of Party Fragmentation, External Popularity, and Internal
Strength on Party Leader Faction’s Portfolio Share . . . . . . . . . 101
6.4 An Example of Power Struggle within the LDP . . . . . . . . . . . 106
6.5 Effects of Party Fragmentation, External Popularity, and Internal
Strength on Rival Faction’s Portfolio Share . . . . . . . . . . . . . 109
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