How does party fractionalization convey preferences for redistribution in parliamentary democracies?

In this paper, we highlight the link between the political demand and social policy outcome while taking into account the design of the party system. The political demand is measured by individual preferences and the design of the party system is defined as the extent of party fractionalization. This is, to our knowledge, the first attempt in the literature to empirically link the political demand and the policy outcome with the help of a direct measure of preferences. Moreover, we account for an additional channel, so far neglected in the literature: The composition effect of the demand. Indeed, the heterogeneity of the demand within countries, more than the level of the demand itself, is shown to have a positive impact on welfare state generosity. This impact increases with the degree of fractionalization of the party system. We run regressions on a sample of 18 OECD countries over 23 years, carefully dealing with the issues raised by the use of time-series cross-section data.