Institutional Constraints on Profligate Politicians: The Conditional Effect of Partisan Fragmentation on Budget Deficits

Abstract

The literature on the common pool resource problem in budgeting has thus far not explored the likely interaction between 'size fragmentation' (the number of decision makers) and 'procedural fragmentation' (the structure of the process in which they interact). The argument put forward in this paper is that the effects of these two types of fragmentation should not be additive, but multiplicative, since theory suggests that the impact of size fragmentation on fiscal policy is conditional on the extent of procedural fragmentation. Using panel data for 57 countries over the period 1975 to 1998, I empirically investigate this interaction in the legislative context and find strong evidence that partisan fragmentation is associated with higher deficits only when it is not moderated by limits on parliamentary amendment authority.