Effects of Electoral Rules, Political Competition and Corruption on the Size and Composition of Government Consumption Spending: An Italian Regional Analysis

Abstract

Abstract This paper analyses how proportionality of the electoral system, political competition and corruption affect the total amount of Italian regional public consumption expenditure and alter the public budget structure. The Italian case is particular: from 1993 the country underwent a change in the electoral system (from proportional to majoritarian) and, at the same time, a campaign was waged against the corruption of public bureaucrats. The aim of this work is to study the political determinants of public consumption spending, and more specifically the role played by political institutions (meaning electoral rules), the intensity of political competition in the "votes' market" and the corruption of public bureaucracy. We used panel data for 20 Italian regions from 1980 to 2003 in order to estimate a quantity effect and an allocation effect of the degree of proportionality of the electoral system, political competition and corruption of public bureaucracy on public consumption spending. The quantity effect of the proportionality of the electoral system and of the degree of political competition is positive; the same holds for corruption, meaning that corruption increases the total level of public spending. Analysis of the allocation effect shows that corruption, rather than the electoral system and political competition, alters the public budget structure towards social services and securities and general service sectors instead of education and health, leading to important policy implications.