Corinna Ahlfeld

Too Many cooks but How is the broth? The Political Economy of Fragmentation Effects on Compensation Payments

Decision-making is at the core of politics and thus, the framework in which decisions are taken must be well chosen so to ensure a fluent and welfare enhancing policy. If this process is constructed poorly or hindered by any external factor reform blockades and delays will emerge and may entail negative aftermaths, so preventing a country from reacting flexibly to changing economic conditions.
The thesis at hand contributes to the discussion on decision-making by focussing on the effects of fragmentation among the political sphere. A large branch of theoretical and also empirical studies is devoted to the problems that cause reform delays and inter alia the effects of political fragmentation predicting that a higher number of players or generally a higher degree of fragmentation is more likely to generate conflicts, thus causing adverse effects to a country's reform activity.
Surely, the idea is intuitive. A higher number of players will increase the conflict potential resulting in higher chances of stalemates in decision-making. The hypothesis though can be scrutinized, due to its limitation to political fragmentation. The hypothesis that fragmentation leads to more blockades is based on the assumption that every conflict results in a stalemate. This prediction is unrealistic. Differences in preferences can perfectly be balanced by negotiations and compensation payments. Alas, compensation payments are regarded as unfair and not accepted among the public. The thesis at hand sheds some light on the complex interplay between fragmentation, compensation payments and reform delays by analyzing the effects of fragmentation, in theory, in the laboratory, conducting an experiment, and comparing the results with the political arena.