Abstract
Multiparty government has often been associated with poor economic policy-making, with distortions like lower growth rates and high budget deficits. One proposed reason for such distortions is that coalition governments face more severe ‘common pool problems’ since parties use their control over specific ministries to advance their specific spending priorities rather than practice budgetary discipline. We suggest that this view of multiparty government is incomplete and that we need to take into account that coalitions may have established certain control mechanisms to deal with such problems. One such mechanism is the drafting of a coalition agreement. Our results, when focusing on the spending behavior of cabinets formed in 17 Western European countries (1970–1998), support our claim that coalition agreements matter for the performance of multiparty cabinets in economic policy-making. More specifically, we find clear support for an original conditional hypothesis suggesting that coalition agreements significantly reduce the negative effect of government fragmentation on government spending in those institutional contexts where prime ministerial power is low.
Highlights
Beginning with the modern ‘‘classics’’ (Bryce 1921; Lowell 1896), political science has distinguished between ‘‘strong’’ and ‘‘weak’’ governments; coalition cabinets are assumed to belong to the latter category
We suggest that this view of multiparty government is incomplete and that we need to take into account that coalitions may have established certain control mechanisms to deal with such problems
We address the question of how coalition governments handle economic policy-making by focusing on government spending as our dependent variable, following the work of several previous authors; most recently, Bawn and Rosenbluth (2006) and Martin and Vanberg (2013)
Summary
Beginning with the modern ‘‘classics’’ (Bryce 1921; Lowell 1896), political science has distinguished between ‘‘strong’’ and ‘‘weak’’ governments; coalition cabinets are assumed to belong to the latter category. The so-called ‘‘fiscal institutionalist’’ literature has identified some institutional rules that are expected to curb government spending One such institutional remedy follows a ‘‘delegation approach’’ and suggests that the common pool problem may be reduced by delegating veto rights to certain offices, such as the Minister of Finance, not bound by the particular interests of any spending department, as they will give more weight to the collective interest of the government, such as keeping a balanced budget (e.g., von Hagen and Harden 1995). Martin and Vanberg (2013) have studied how the existence of these fiscal rules—amendment limits, restrictions on budget size, and offsetting amendments—affect the coalition parties’ abilities to increase the spending of ‘‘their’’ ministries and to prevent their partners from increasing the expenditure of the departments under their control They find such rules to be effective instruments that significantly mitigate or even eliminate the pressure on government spending resulting from the presence of multiple parties in government.
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