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

Abstract:     
Using a new data set from 1890 to 2000, we estimate how the adoption of proportional representation affects policies in Swiss cantons. We show that proportional systems shift spending toward broad goods (e.g. education and welfare bene…fits) but decrease spending on targetable goods (e.g. roads and agricultural subsidies). We …find little evidence that proportional representation increases the size of government. We also demonstrate that compositional changes of the legislature, i.e. party fragmentation and better representation of left-wing parties, are associated with more spending. The direct electoral incentives of proportional rule appear to reduce government spending.

Keywords: Electoral System, Proportional Rule, Fiscal Policy, Switzerland

JEL Classifications: H11, H52, H53, N44

Working Paper Series