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Does the Size of the Legislature Affect the Size of Government? Evidence from Two Natural Experiments

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  • Pettersson-Lidbom, Per

Abstract

Previous empirical studies have found a positive relationship between the size of legislature and the size of government. Those studies, however, do not adequately address the concerns of endogeneity. In contrast, this paper uses variation in legislature size induced by statutory council size laws in Finland and Sweden to estimate the causal effect of legislature size on government size. These laws create discontinuities in council size at certain known thresholds of an underlying continuous variable, which make it possible to generate ?near experimental? causal estimates of the effect of council size on government size. In contrast to previous findings, I find a negative relationship between council size and government size: on average, spending and revenues are decreased by roughly 0.5 percent for each additional council member.

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  • Pettersson-Lidbom, Per, 2004. "Does the Size of the Legislature Affect the Size of Government? Evidence from Two Natural Experiments," Discussion Papers 350, VATT Institute for Economic Research.
  • Handle: RePEc:fer:dpaper:350
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    Keywords

    Government size; legislature; regression-discontinuity design; natural experiment; Macroeconomic policy; Talouspolitiikka; International comparisons; Kansainväliset vertailut; Local public economics; Kunnallistalous; Policy analysis and modelling; Päätöksenteon tuki ja mallintaminen; C900 - Design of Experiments: General; D700 - Analysis of Collective Decision-Making: General; E600 - Macroeconomic Policy Formation; Macroeconomic Aspects of Public Finance; Macroeconomic Policy; General Outlook: General; H000 - Public Economics: General; H100 - Structure and Scope of Government: General; H300 - Fiscal Policies and Behavior of Economic Agents: General; H700 - State and Local Government; Intergovernmental Relations: General; K100 - Basic Areas of Law: General (constitutional law); P160 - Capitalist Systems: Political Economy;

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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