Political Institutions and Policy Outcomes: What are the Stylized Facts?

Persson, Torsten; Tabellini, Guido

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Political Institutions and Policy Outcomes: What are the Stylized Facts?

CEPR Discussion Paper No. 2872

63 Pages Posted: 31 Jul 2001

See all articles by Torsten Persson

Torsten Persson

Stockholm University - Institute for International Economic Studies (IIES); London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Guido Tabellini

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

There are 2 versions of this paper

Date Written: July 2001

Abstract

We investigate the effect of electoral rules and political regimes on fiscal policy outcomes in a panel of 61 democracies from 1960 onwards. In presidential regimes, the size of government is smaller and less responsive to income shocks, compared to parliamentary regimes. Under majoritarian elections, social transfers are smaller and aggregate spending less responsive to income shocks than under proportional elections. Institutions also shape electoral cycles: only in presidential regimes is fiscal adjustment delayed until after the elections, and only in proportional and parliamentary systems do social transfers expand around elections. Several of these empirical regularities are in line with recent theoretical work; others are still awaiting a theoretical explanation.

Keywords: Constitution, politics, presidentialism, electoral rule, government spending

JEL Classification: H00

Suggested Citation: Suggested Citation

Persson, Torsten and Tabellini, Guido, Political Institutions and Policy Outcomes: What are the Stylized Facts? (July 2001). CEPR Discussion Paper No. 2872, Available at SSRN: https://ssrn.com/abstract=278115