The Cost of Ruling. A Foundation Stone for Two Theories

University of Aarhus Department of Economics Working Paper No. 1999-9

26 Pages Posted: 16 Feb 2000

See all articles by Peter Nannestad

Peter Nannestad

Aarhus University - Department of Economics

Martin Paldam

Aarhus University - Department of Economics

Abstract

It is a robust result that the average government (ruling a normal election period) in an established democracy loses about 2% of the vote. Three explanations exist: (i) The coalition-of-minorities theory. (ii) The median-gap theory. (iii) The grievance-asymmetry theory. These theories can all be calibrated to explain the fact. While (i) is difficult to justify, both (ii) and (iii) are integrated into other theories: (ii) is integrated into the "median-voter-complex" that rules out the existence of partisan cycles. (iii) is integrated into the "loss-aversion-complex" that via the grievance asymmetry provides a "deep-parameter" explanation of the cost-of ruling. It is also an important explanation for the partisan cycle model. We demonstrate that the two complexes are alternatives and argue that the loss-aversion-complex is more powerful.

JEL Classification: D72, D78

Suggested Citation

Nannestad, Peter and Paldam, Martin, The Cost of Ruling. A Foundation Stone for Two Theories. University of Aarhus Department of Economics Working Paper No. 1999-9. Available at SSRN: https://ssrn.com/abstract=165709 or http://dx.doi.org/10.2139/ssrn.165709

Peter Nannestad

Aarhus University - Department of Economics ( email )

University Park
DK-8000 Aarhus C
Denmark

Martin Paldam (Contact Author)

Aarhus University - Department of Economics ( email )

Universitetsparken
Building 350
DK-8000 Aarhus C
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

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