The Economic Effects of Electoral Rules: Evidence from Unemployment Benefits

47 Pages Posted: 31 Jul 2018 Last revised: 5 Nov 2018

See all articles by Vincenzo Galasso

Vincenzo Galasso

University of Lugano; Centre for Economic Policy Research (CEPR)

Salvatore Nunnari

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: July 2018

Abstract

This paper provides a novel test of the link from electoral rules to economic policies. We focus on unemployment benefits because their classification as a broad or targeted transfer may vary - over time and across countries - according to the geographical dispersion of unemployed citizens, the main beneficiaries of the program. A simple theoretical model delivers unambiguous predictions on the interaction between electoral institutions and the unemployment rate in contestable and safe districts: electoral incentives induce more generous unemployment benefits in majoritarian than in proportional systems if and only if the unemployment rate is higher in contestable than in safe districts. We test this prediction using a novel dataset with information on electoral competitiveness and unemployment rates at district level, and different measures of unemployment benefit generosity for 16 OECD countries between 1980 and 2011. The empirical analysis strongly supports the theoretical predictions.

Keywords: Electoral Rules, Swing Districts, Unemployment Benefits

JEL Classification: D72, D78, H53, J65

Suggested Citation

Galasso, Vincenzo and Nunnari, Salvatore, The Economic Effects of Electoral Rules: Evidence from Unemployment Benefits (July 2018). CEPR Discussion Paper No. DP13081. Available at SSRN: https://ssrn.com/abstract=3222595

Vincenzo Galasso (Contact Author)

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, 6900
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Salvatore Nunnari

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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