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The Composition Of Public Spending And The Nationalization Of Party Systems In Western Europe

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Author Info
Ignacio Lago-Peñas () (Pompeu Fabra University. Department of Social and Political Sciences, Barcelona)
Santiago Lago-Peñas (University of Vigo. Department of Applied Economics, Campus universitario.)

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Abstract

Do political institutions shape the structure of public spending? Based on a sample of 141 elections in eighteen Western European countries over the period 1970-1998, this paper shows that governments’ margin of maneuverability to design and implement fiscal policies depends on the level of party linkage or the nationalization of party systems, defined as the extent to which parties are uniformly successful in winning votes across districts. The mechanism behind this argument is that in weakly nationalized countries there are additional transaction costs to change the budget as a consequence of the survival of local parties and interests. Therefore, the composition of public spending is more rigid here than in highly nationalized countries.

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Paper provided by Instituto de Estudios Fiscales in its series Working Papers with number 8-06 Classification-JEL :.

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Handle: RePEc:hpe:wpaper:y:2006:i:8

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Keywords: Electoral system; fiscal policy; linkage; nationalization; party system; public good; transaction costs; transfers.;

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  2. Ana Barreira & Rui Nuno Baleiras, 2004. "Elections and the public expenditure mix," ERSA conference papers ersa04p291, European Regional Science Association. [Downloadable!]
  3. Bondonio, Daniele, 2002. "Evaluating the Employment Impact of Business Incentive Programs in EU Disadvantaged Areas. A case from Northern Italy," P.O.L.I.S. department's Working Papers 27, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  4. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December. [Downloadable!] (restricted)
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  5. Otto, Glenn & Voss, Graham M, 1994. "Public Capital and Private Sector Productivity," The Economic Record, The Economic Society of Australia, vol. 70(209), pages 121-32, June.
  6. Morrison, Catherine J & Schwartz, Amy Ellen, 1996. "Public Infrastructure, Private Input Demand, and Economic Performance in New England Manufacturing," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 91-101, January.
  7. Alesina, Alberto, et al, 2003. " Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-94, June. [Downloadable!] (restricted)
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  8. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April. [Downloadable!] (restricted)
  9. F. Javier Arze del Granado & Jorge Martinez-Vazquez & Robert McNab, 2005. "Fiscal Decentralization and The Functional Composition of Public Expenditures," International Studies Program Working Paper Series, at AYSPS, GSU paper0501, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
  10. Alessandro Lizzeri & Nicola Persico, 2001. "The Provision of Public Goods under Alternative Electoral Incentives," American Economic Review, American Economic Association, vol. 91(1), pages 225-239, March. [Downloadable!] (restricted)
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  11. Tridimas, George, 2001. " The Economics and Politics of the Structure of Public Expenditure," Public Choice, Springer, vol. 106(3-4), pages 299-316, March. [Downloadable!] (restricted)
  12. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
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