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Does the Size of the Legislature Affect the Size of Government? Evidence from a Natural Experiment

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  • Pettersson Lidbom, Per

    () (Dept. of Economics, Stockholm University)

Abstract

Previous empirical studies have found a positive relationship between the size of the legislature and the size of government. Those studies, however, do not adequately address the concerns of endogeneity. In contrast, this paper exploits an exogenous variation in the size of the legislature induced by a statutory law linking council size to the number of eligible voters in Swedish local governments. The statutory law can potentially create discontinuities between number of eligible voters and council size at certain known values. These discontinuities are used to construct instrumental variable estimates of the effect of council size on government size. In contrast to previous findings, the results show that an increase of the council size leads to a statistically and economically significant decrease in spending and revenues. On average, spending and revenues are decreased by roughly 0.5-0.8 percent for each additional council member.

Suggested Citation

  • Pettersson Lidbom, Per, 2003. "Does the Size of the Legislature Affect the Size of Government? Evidence from a Natural Experiment," Research Papers in Economics 2003:18, Stockholm University, Department of Economics.
  • Handle: RePEc:hhs:sunrpe:2003_0018
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    References listed on IDEAS

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    1. Gilligan, Thomas W. & Matsusaka, John G., 2001. "Fiscal Policy, Legislature Size, and Political Parties: Evidence from State and Local Governments in the First Half of the 20th Century," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 57-82, March.
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    Cited by:

    1. Pettersson-Lidbom , Per, 2003. "Do Parties Matter for Fiscal Policy Choices? A Regression-Discontinuity Approach," Research Papers in Economics 2003:15, Stockholm University, Department of Economics.
    2. Pettersson-Lidbom, Per, 2012. "Does the size of the legislature affect the size of government? Evidence from two natural experiments," Journal of Public Economics, Elsevier, vol. 96(3), pages 269-278.

    More about this item

    Keywords

    government size; legislature; regression-discontinuity design; natural experiment;

    JEL classification:

    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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