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http://ssrn.com/abstract=1559745
 
 

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


Patricia Funk


Universitat Pompeu Fabra

Christina Gathmann


Alfred-Weber Institut; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

February 2010

CESifo Working Paper Series No. 2958

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.

Number of Pages in PDF File: 50

Keywords: electoral system, public finance, political fragmentation, matching

JEL Classification: H00, H10, H40, H52, H53, H72, N83, N84

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Date posted: February 28, 2010  

Suggested Citation

Funk, Patricia and Gathmann, Christina, How Do Electoral Systems Affect Fiscal Policy? Evidence from State and Local Governments, 1890 to 2005 (February 2010). CESifo Working Paper Series No. 2958. Available at SSRN: http://ssrn.com/abstract=1559745

Contact Information

Patricia Funk
Universitat Pompeu Fabra ( email )
Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain
+34 94 5421942 (Phone)
+34 93 5421746 (Fax)
Christina Gathmann (Contact Author)
Alfred-Weber Institut ( email )
Bergheimer Str. 20
Heidelberg, 69115
Germany
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
HOME PAGE: http://www.iza.org/index_html?lang=en&mainframe=http%3A//www.iza.org/en/webcontent/personnel/photos%
CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.stanford.edu/~cgathman
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