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Government Formation, Budget Negotiations and Re-election Uncertainty: The Cases of Minority and Majority Coalition Governments

  • Gerald Pech

This paper presents an analytical approach, which connects the form of a government and the level of expenditures, which it runs. It explains the findings on spending patterns of minority and majority coalition governments reported by the empirical literature. A government formation game is followed by budget negotiations in the cabinet and the parliament. The demand of a party in the parliament reflects her re-election prospects. In the absence of political risk, majority coalition and minority governments are predicted not to run different expenditure policies. With a rise in re-election uncertainty, a pre-existing coalition government faces risk of termination, in which case the probability that it is followed by a minority government with higher expenditures increases.

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Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0115.

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Date of creation: Feb 2001
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Handle: RePEc:san:crieff:0115
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  1. Edin, P-A. & Ohlsson, H., 1990. "Political Determinants Of Budget Deficits: Coalition Effects Versus Minority Effects," Papers 1990k, Uppsala - Working Paper Series.
  2. de Haan, Jakob & Sturm, Jan-Egbert & Beekhuis, Geert, 1999. " The Weak Government Thesis: Some New Evidence," Public Choice, Springer, vol. 101(3-4), pages 163-76, December.
  3. Daniel Diermeier & Antonio Merlo, 1998. "Government Turnover in Parliamentary Democracies," Discussion Papers 1232, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Merlo, Antonio, 1997. "Bargaining over Governments in a Stochastic Environment," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 101-31, February.
  5. Persson, Torsten, 1998. "Economic Policy and Special Interest Politics," Economic Journal, Royal Economic Society, vol. 108(447), pages 310-27, March.
  6. Gerald Pech, 2004. "Coalition Governments Versus Minority Governments: Bargaining Power, Cohesion and Budgeting Outcomes," Public Choice, Springer, vol. 121(1), pages 1-24, October.
  7. de Haan, Jakob & Sturm, Jan-Egbert, 1997. "Political and economic determinants of OECD budget deficits and government expenditures: A reinvestigation," European Journal of Political Economy, Elsevier, vol. 13(4), pages 739-750, December.
  8. de Haan, Jakob & Sturm, Jan-Egbert, 1994. " Political and Institutional Determinants of Fiscal Policy in the European Community," Public Choice, Springer, vol. 80(1-2), pages 157-72, July.
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