SMU SOE Seminar Series (November 13, 2024): Impacts of Third-Party Entry to a Polarized Two-Party Political System: A Structural Analysis

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ABSTRACT

Leveraging both voting and polling data and employing estimation methods similar to Petrin (2002) and Berry et al. (2004), we estimate a discrete choice model to examine the impacts of third-party entry in the 2024 Taiwan presidential election. We find that such entry exacerbated political polarization because it strengthened the two major parties’ incentives to further polarize. First, a stronger competitor (the third party) for central voters makes each major party’s effort to gain such voters less effective; second, each major party would become less worried that its further polarization would shift all its central voters to the other major party because these voters would be split by the third party. Additional analyses show that for the third party, the help obtained from strategically adjusting its ideological position is limited because moving toward either side will make gaining voters on one side and losing voters on the other side offset each other. Ko’s (the third-party leader) endorsement of Democratic Progressive Party (DPP) has little effect on voters’ perceptions of DPP’s ideological position, whereas Ko’s endorsement of Kuomintang can substantially alter voters’ perceptions of Kuomintang’s ideological position. In contrast, through his endorsement, Ko’s nonideological effect can be substantially transmitted to DPP but not to Kuomintang.

Keywords: Entry, Political Duopoly, Third Party, Political Polarization, Vote, Alliance, Endorsement, Two-Party System.

JEL: D72, D74, L1, L2, P16.

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