Does Replacing Leaders Actually Improve Institutions?

From firing a CEO to switching doctors, the power to replace someone is a fundamental tool for accountability. Nowhere is it truer than in politics, where elected officials must earn voters’ support. But does the threat of being replaced reliably ensure that leaders act in our best interest?

New research by Navin Kartik, Elliot Lipnowski, and Harry Pei explores the effectiveness of the replacement threat through a reputational lens. Their model distinguishes between two kinds of leaders: principled or good types who always work hard, and opportunists who would rather shirk responsibilities unless they have a strong incentive to build (and maintain) a good reputation among the electorate.

The authors’ analysis reveals a sharp contrast based on the economic conditions. In settings where effort is relatively easy and performance can be measured precisely, political norms can sustain effort from even opportunistic leaders. However, these same circumstances can create a trap of excessive turnover. Paradoxically, voters may replace an officeholder even after good performance because they anticipate that a good reputation allows the politician to start coasting. This dynamic can lead to a permanent cycle of mediocrity.

Things are different when effort is costly or performance measures are opaque. In such circumstances, opportunists eventually find it too difficult to ​maintain the act. They inevitably end up revealing their true nature through poor performance, which causes voters to replace them. This process of weeding out opportunists continues until the system lands on a good leader—someone who works hard out of principle, not just for fear of being replaced.

Ultimately, the paper suggests that if we cannot perfectly control opportunistic leaders’ behavior, our safest bet is an environment that ensures they are eventually exposed. The quality of our institutions in the long run depends on finding the right individuals to lead them.