Minimum winning versus oversized coalitions in public finance: the role of uncertainty

This paper extends Persson, Roland and Tabellini’s (2000) simple legislature in the context of public finance with certainty to uncertainty. In our uncertain world, oversized coalitions (OSCs) as well as minimum winning coalitions (MWCs) may arise in equilibrium, and the agenda setter’s proposed policy may fail to receive a majority support. This is in marked contrast to the certain world in which only MWCs can arise in equilibrium and the agenda setter’s proposal never fails to pass. When OSCs arise, we show that both public good provision and redistribution are likely to achieve their first-best solution even if the legislature is simple. ∗Corresponding author, Tsung-Sheng Tsai. Mailing address: Department of Economics, National Tsing Hua University, 101, Section 2, Kuang-Fu Road, Hsinchu 300, Taiwan. Email: [email protected]