Short versus Long Coalitions: Electoral Accountability and the Size of the Public Sector Short versus Long Coalitions: Electoral Accountability and the Size of the Public Sector

This paper examines the policy consequences of how many parties form governments in parliamentary systems. We argue that parties externalize costs not borne by their support groups; and larger parties internalize more costs than small parties because they represent more groups. This argument implies that the public sector should be larger the more parties there are in government. We test this prediction using yearly time series cross sectional data from 1970 to 1998 in 17 European countries, and find that increasing the number of parties in government increases the fraction of GDP accounted for by government spending by close to half a percentage point, or more than one billion current dollars in the typical year. We find little support for the alternative claim that the number of legislative parties affects the size of the public sector, except by way of the number of parties in government.