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Public Spending, Public Deficits, and Government Coalitions

  • André Blais
  • Jiyoon Kim
  • Martial Foucault

The study examines the relationship between types of government and level of public spending. There are two competing perspectives about the consequences of coalition governments on the size of public expenditures. The most common argument is that government spending increases under coalition governments, compared with one-party governments. Another line of thought contends that coalition governments often are stalled in the status quo due to the veto power of each member. Our analysis of public spending in 33 parliamentary democracies between 1972 and 2000 confirms the latter argument that coalition governments have a status quo bias. Particularly, we find that single-party governments are apt to modify the budget according to the current fiscal condition, which enables them to increase or decrease spending more flexibly. On the contrary, coalition governments find it difficult not only to decrease spending under difficult fiscal conditions but also to increase it even under a more favourable context, because each member of the coalition has a veto power. L'étude examine la relation entre les types de gouvernement et le niveau des dépenses publiques. Il existe dans la littérature deux points de vue divergents sur les conséquences des gouvernements de coalition sur la taille des dépenses publiques. L'argument le plus commun est que les augmentations de dépenses publiques des gouvernements de coalition augmentent davantage que les gouvernements à parti unique. Une autre ligne de pensée soutient que les gouvernements de coalition sont souvent installés dans le statu quo en raison du droit de veto de chaque parti de la coalition. Notre analyse des dépenses publiques dans 33 démocraties parlementaires entre 1972 et 2000 confirme que les gouvernements de la coalition ont un biais de statu quo. En particulier, nous constatons que les gouvernements à parti unique sont plus enclins à modifier le budget en fonction de leur solde budgétaire, ce qui leur permet d'augmenter ou de diminuer les dépenses de manière plus souple. Au contraire, les gouvernements de coalition ont non seulement du mal à diminuer les dépenses fiscales dans des conditions difficiles, mais aussi de l'augmenter, même dans un contexte plus favorable, parce que chaque membre de la coalition peut menacer d'utiliser son droit de veto.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2010s-49.

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Length: 39 pages
Date of creation: 01 Dec 2010
Date of revision:
Handle: RePEc:cir:cirwor:2010s-49
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