How is Government Stability Affected by the State of the Economy? Payoff Structures, Government Type and Economic State

Abstract

To what extent are incumbent governments affected by the state of the economy when it comes to premature dissolution? This article investigates this research question using a data set on parties and governments for 18 West European countries for the period 1945–2013. In addition to investigating the general effect of the state of the economy on government termination, we hypothesize that macroeconomic conditions affect cabinet termination in different ways depending on the type of government that is in power. Using Cox proportional hazards models to estimate how different government types are impacted by the same changes in the economy, our results indicate that economic changes do matter, but that they mainly affect coalition governments. Our results also indicate that there is a difference between minority and majority governments when it comes to the type of termination. Minority coalition governments resolve to early elections, not replacements, presumably because a minority government does not survive defection. Majority coalition governments, in contrast, show sensitivity towards both types of terminations.