Working Paper: CEPR ID: DP2742
Authors: Gian Maria Milesi-Ferretti; Roberto Perotti; Massimo Rostagno
Abstract: We study the effects of electoral institutions on the size and composition of public expenditure in OECD and Latin American countries. We emphasize the distinction between purchases of goods and services, which are easier to target geographically, and transfers, which are easier to target across social groups. We present a theoretical model in which voters anticipating government policymaking under different electoral systems have an incentive to elect representatives more prone to transfer (public good) spending in proportional (majoritarian) systems. The model also predicts higher total primary spending in proportional (majoritarian) systems when the share of transfer spending is high (low). After defining rigorous measures of proportionality to be used in the empirical investigation, we find considerable support for our predictions.
Keywords: electoral rules; proportionality; public spending; transfers
JEL Codes: H11; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| electoral systems (K16) | behavior of elected officials (D72) |
| behavior of elected officials (D72) | composition of public expenditure (H50) |
| proportional electoral systems (P50) | higher transfer spending (H87) |
| majoritarian electoral systems (D72) | higher public goods spending (H40) |
| electoral systems (K16) | public spending patterns (H50) |
| economic shocks (F69) | response of spending in proportional systems (P35) |