Government Formation and Endogenous Parties

I provide a formal theory of government for a political system characterized by a proportional representation electoral system, a parliamentary government that exercises collective responsibility, and a government formation process. Political parties are assumed to be policy-oriented and to serve the interests of those who vote for them. Parties choose policy platforms that determine their representation in parliament; and given that representation, the parties bargain over the government to be formed and the policies that government will implement. The model yields equilibria with the property that parties choose dispersed policy positions. Thus, electoral incentives in proportional representation parliamentary systems need not lead to policy convergence. The theory provides predictions of party locations such as those developed in the manifesto project.