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

  • Persson, Torsten

    ()

    (Institute for International Economic Studies, Stockholm University)

  • Tabellini, Guido

    ()

    (Bocconi University)

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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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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Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden

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  1. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  2. Persson, Torsten & Roland , Gérard & Tabellini, Guido, 1997. "Comparative Politics and Public Finance," Seminar Papers 633, Stockholm University, Institute for International Economic Studies.
  3. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
  4. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
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  6. 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.
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  8. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  9. Coughlin, Peter & Nitzan, Shmuel, 1981. "Electoral outcomes with probabilistic voting and Nash social welfare maxima," Journal of Public Economics, Elsevier, vol. 15(1), pages 113-121, February.
  10. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
  11. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
  12. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
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  14. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, vol. 33(1), pages 1-34, January.
  15. 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.
  16. 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.
  17. 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.
  18. Pommerehne, Werner W & Frey, Bruno S, 1978. "Bureaucratic Behavior in Democracy: A Case Study," Public Finance = Finances publiques, , vol. 33(1-2), pages 98-112.
  19. Persson, Torsten & Roland, Gerard & Tabellini, Guido, 1998. "Towards micropolitical foundations of public finance," European Economic Review, Elsevier, vol. 42(3-5), pages 685-694, May.
  20. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1163-1202.
  21. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1243-1284.
  22. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  23. 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.
  24. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
  25. Michele Polo, . "Electoral competition and political rents," Working Papers 144, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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