Political Fragmentation and Government Spending: Bringing Ideological Polarization into the Picture

34 Pages Posted: 18 Feb 2010 Last revised: 17 Sep 2015

See all articles by Marcela Eslava

Marcela Eslava

University of the Andes (CEDE)

Oskar Nupia

Universidad de los Andes, Colombia - Department of Economics

Date Written: January 11, 2010

Abstract

The literature has come to no agreement about the empirical validity of the so-called weak government hypothesis. According to this hypothesis, political fragmentation should lead to higher government expenditure. With the aim of reconciling the empirical evidence with theory, in this paper we discuss and test a new hypothesis about this relationship: that fragmentation should matter for public spending only to the extent that the degree of polarization is high enough. Our results for a sample of presidential democracies show that a marginal change in the level of fragmentation in the governing coalition affects positively the size of the budget, but only if there is some degree of polarization. We also find that what matters for fiscal policy in presidential democracies is the degree of fragmentation and polarization within the governing coalition, rather than in the legislature at large. For parliamentary democracies we find erratic patterns for the relationship between fragmentation and public spending. Our results suggest interesting differences between presidential and parliamentary systems.

Keywords: Common-Pool Resource Problem, Government Spending, Political

JEL Classification: E62, H61

Suggested Citation

Eslava, Marcela and Nupia, Oskar, Political Fragmentation and Government Spending: Bringing Ideological Polarization into the Picture (January 11, 2010). Documento CEDE No. 2010-03, Available at SSRN: https://ssrn.com/abstract=1554451 or http://dx.doi.org/10.2139/ssrn.1554451

Marcela Eslava (Contact Author)

University of the Andes (CEDE) ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Oskar Nupia

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

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