The Relationship between Legislature Size and Fiscal Policy: A Cross-Country Examination

Abstract

Using an estimation method developed by Blanchard and Wolfers (2000) we study whether the size of a country's legislature impacts its fiscal response to common and country-specific shocks. The use of this method allows us to estimate the effects of legislature size while also controlling for country-specific unobserved heterogeneity; an endogeneity issue common to this literature. We also classify legislatures using a definition of bicameralism based on fiscal power that was previously used by Heller (1997). We find evidence that larger than average upper chambers are associated with more government spending as a percentage of GDP.