Government fragmentation and fiscal deficits: a regression discontinuity approach Articles uri icon

publication date

  • April 2018

start page

  • 367

end page

  • 391

issue

  • 3-4

volume

  • 175

International Standard Serial Number (ISSN)

  • 0048-5829

Electronic International Standard Serial Number (EISSN)

  • 1573-7101

abstract

  • Some electoral systems favor strong single-party majority governments, while
    others the formation of coalitions. Having one or the other is likely to affect economic outcomes
    in ways that are unintended when the electoral rules are approved. In this paper, we
    show that government fragmentation has large fiscal implications. We also provide results
    that have a causal interpretation. Using a panel of Spanish municipalities, along with a
    close-elections regression discontinuity design, we find that single-party majorities run
    budgets with a 1.5% point larger primary surplus than that of coalitions. In addition, we
    show that lower deficits are driven mainly by single-party majority governments" capacity
    to raise more revenues. These findings are robust to several model specifications.

subjects

  • Economics
  • Politics

keywords

  • fiscal deficit; single-party majority government; coalitions; regression discontinuity