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The size and scope of government: Comparative politics with rational politicians

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  • Persson, Torsten

    ()
    (Institute for International Economic Studies, Stockholm University)

  • Tabellini, Guido

    ()
    (Bocconi University)

Abstract

We try to demonstrate how economists may engage in research on comparative politics, relating the size and composition of government spending to the political system. A Downsian model of electoral competition and forward-looking voting indicates that majoritarian - as opposed to proportional - elections increase competition between parties by focusing it into some key marginal districts. This leads to less public goods, less rents for politicians, more redistribution and larger government. A model of legislative bargaining and backward-looking voting indicates that presidential - as opposed to parliamentary - regimes increase competition between both politicians and voters. This leads to less public goods, less rents for politicians, less redistribution and smaller government. We confront these predictions with cross-country data from around 1990, controlling for economic and social determinants of government spending. We find strong and robust support for the prediction that the size of government is smaller under presidential regimes, and weaker support for the prediction that majoritarian election are associated with less public goods.

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Bibliographic Info

Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 658.

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Length: 53 pages
Date of creation: 05 Oct 1998
Date of revision:
Handle: RePEc:hhs:iiessp:0658

Note: Published in: European Economic Review 43, 1999, 699-735
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Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/
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Keywords: Political economics; Electoral rules; Political regimes; Public finance; Rents; Redistribution;

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  1. Torsten Persson & Gerard Roland & Guido Tabellini, . "Comparative Politics and Public Finance," Working Papers 114, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
  3. Torsten Persson & Gerard Roland & Guido Tabellini, . "Towards Micropolitical Foundations of Public Finance," Working Papers 119, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
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  13. Hinich, Melvin J. & Ledyard, John O. & Ordeshook, Peter C., 1972. "Nonvoting and the existence of equilibrium under majority rule," Journal of Economic Theory, Elsevier, vol. 4(2), pages 144-153, April.
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  15. Roger B. Myerson, 1991. "Effectiveness of Electoral Systems for Reducing Government Corruption: A Game-Theoretic Analysis," Discussion Papers 956, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
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  18. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  19. Alberto Alesina & Roberto Perotti, 1996. "Budget Deficits and Budget Institutions," IMF Working Papers 96/52, International Monetary Fund.
  20. von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April.
  21. Michele Polo, . "Electoral competition and political rents," Working Papers 144, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  22. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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