Do Term Limits Benefit Voters?

When allies of President Horacio Cartes tried to force an amendment through Paraguay’s congress last year to allow him to run for a second term, rioters took to the streets and set fire to Congress, illustrating in particularly dramatic fashion the sharp divisions around term limits.

Cartes eventually decided not to run again, but he may have been the exception. In recent years,  term limits have been eliminated entirely in more than one country and extended in others of the region. Today only four countries in Latin America—Mexico, Colombia, Guatemala, and Paraguay—prohibit both immediate reelection and non-consecutive reelection.

Still stark differences remain between those who support the idea of presidential reelection and those who don’t.

The arguments for term limits

Opponents of reelection argue that presidents can build up too much power in office and become  corrupt. They also say that incumbency gives leaders advantages, like the ability to boost state spending before elections, that allow them to unfairly perpetuate themselves in power.

Proponents counter that the possibility of reelection encourages politicians to prove themselves in office and fosters accountability.

My research empirically supports the latter view. In a paper co-authored with University of Maryland professors S. Borağan Aruoba and Allan Drazen, we show that the possibility of reelection can have a strong disciplining effect on leaders. It can improve performance and give voters critical information with which to make better choices at the polls.

We created a model to examine how the possibility of serving two terms affected the performance of governors in the 50 states of the United States from 1978-2014. We examined their approval ratings and showed how those ratings correlate with non-ideological performance indicators like state per-capita income growth, population growth and unemployment.

The model also separates governor quality from circumstances beyond the governor’s control (exogenous shocks), such as a nationwide economic recession, to infer who are “good” and “bad” governors.

Two-term systems improve voter welfare

We found that the possibility of reelection to a second term served as a powerful incentive for good governance. Indeed, two-term systems resulted in a 4.2% improvement in voter welfare relative to what would have been the case with a one term limit, with a 13-percentage point increase in the fraction of governors who exerted high effort in their first term.

Otherwise weak leaders were particularly affected by the possibility of reelection.  Two-thirds of the welfare gain for citizens came from otherwise bad governors who were forced by the necessities of reelection to improve their performance. Election pressure can focus the mind.

Reelection prospects reduce corruption

A study by researchers at UC Berkeley and PUC-Rio examined corruption through federal audits of municipal spending in Brazil and reached a similar conclusion. It found that mayors still in their first term and facing reelection made off with 27% fewer resources than those in their second and last term. Some US$550 million is lost each year to corruption at the local level in Brazil, the researchers estimate. That means, they say, that first-term mayors steal around US$55,000 less than term-limited mayors.

In our study, we also found that the possibility of reelection helps voters select better leaders. Voters normally dedicate limited effort to evaluting a governor’s quality based on her past performance. That can reduce their welfare gains. But we simulated a situation where voters are considerably more informed, as they might be if they closely followed the news, and found that this led to an additional 0.5% improvement in their welfare, above and beyond the 4.2% gain that results from the disciplining effect of electoral pressure. That, of course, would be impossible with biased or censored media, but it does show the importance of allowing governors to run again after having established a track record in office.

This is certainly not the final word. Our study was conducted in a different political system with stronger rule-of-law institutions than that which characterizes most of Latin America. But it does suggest that reelection can give incumbents an incentive to maximize their performance while presenting voters with a track record they can use to improve selection and screen out low performers.