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How do Electoral Systems Affect Fiscal Policy? Evidence from State and Local Governments, 1890 to 2005

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  • Patricia Funk
  • Christina Gathmann

Abstract

Using a new data set on Swiss state and local governments from 1890 to today, we analyze how the adoption of proportional representation affects fiscal policy. We show that proportional systems shift spending toward broad goods (e.g. education and welfare benefits) but decrease spending on targetable goods (e.g. roads and agricultural subsidies). Our evidence does not suggest that proportional representation increases the overall size of government. We provide new evidence on the mechanism behind these estimates. We show that proportional elections lead to better political representation of left-wing parties, which are associated with more spending. Furthermore, proportional elections lead to higher political fragmentation. However, since political fragmentation increases spending in a plurality system only, proportional elections reduce spending through its more moderate effects of fractionalized parliaments.

Suggested Citation

  • Patricia Funk & Christina Gathmann, 2010. "How do Electoral Systems Affect Fiscal Policy? Evidence from State and Local Governments, 1890 to 2005," CESifo Working Paper Series 2958, CESifo.
    • Handle: RePEc:ces:ceswps:_2958
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    References listed on IDEAS

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    Cited by:

    1. Stefano Gagliarducci & Tommaso Nannicini & Paolo Naticchioni, 2011. "Electoral Rules and Politicians' Behavior: A Micro Test," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 144-174, August.
    2. Migheli, Matteo & Ortona, Guido, 2009. "Majority, proportionality, governability and factions," POLIS Working Papers 122, Institute of Public Policy and Public Choice - POLIS.
    3. Galasso, Vincenzo & Nannicini, Tommaso, 2013. "Men Vote in Mars, Women Vote in Venus: A Survey Experiment in the Field," CEPR Discussion Papers 9547, C.E.P.R. Discussion Papers.
    4. Galasso, Vincenzo & Nunnari, Salvatore, 2010. "Electoral Incentives and Economic Policy across Political Regimes," CEPR Discussion Papers 7959, C.E.P.R. Discussion Papers.
    5. Raffaella SANTOLINI, 2013. "Electoral rules and public expenditure composition: Evidence from Italian regions," Working Papers 396, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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    More about this item

    Keywords

    electoral system; public finance; political fragmentation; matching;
    All these keywords.

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • N83 - Economic History - - Micro-Business History - - - Europe: Pre-1913
    • N84 - Economic History - - Micro-Business History - - - Europe: 1913-

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