The Size and Scope of Government: Comparative Politics with Rational Politicians

Abstract

Insert Graph 2 about here How can we explain this variation?There are many possible, and complementary, answers to this question.In this lecture, we advocate building a positive theory of the size and scope of government on the basis of comparative politics.That is, we ask whether and how di¤erent political institutions a¤ect the size and composition of government spending.In particular, we study two fundamental features of political institutions: the electoral rule, contrasting majoritarian and proportional electoral systems, and the regime type, contrasting presidential and parliamentary regimes.Despite a large literature on the size of government, the speci…c question of how these political institutions in ‡uence public spending has been neglected until recently.Traditional public …nance, with its normative approach, has not even posed the question.The literature on public choice and political economics has provided important insights on the determinants of the size of government-di¤erent branches of this literature are surveyed in Frey (1983), Mueller (1989), Mueller (1997) and Persson and Tabellini (1998).But most of this research has not systematically investigated the link between political institutions and public spending, and to the extent that it has, the focus has been on features other than the electoral rule and the regime type. 2 Political scientists have done much more work comparing political systems, and comparative politics is indeed a well-established sub…eld in political science.A large body of theoretical, empirical and descriptive research concentrates precisely on electoral rules and regime types.But this work is typically con…ned to the analysis of political phenomena, such as how the electoral rule a¤ects the number of parties, or how the regime type a¤ects the frequency of political crises, or protests by the citizens.3 2 Von Hagen and Harden (1996), Alesina and Perotti (1996), and Inter-American Development Bank (1997) contrast alternative budgetary institutions, but their main focus is on budget de…cits, not on the size or composition of spending.Roubini and Sachs (1989) and Grilli, Masciandaro and Tabellini (1991) discuss electoral rules and party structures of OECD countries, but again with regard to public debt accumulation.There is a also a literature on …scal federalism and the size of government, which is surveyed in Inman and Rubinfeld (1997) and Persson and Tabellini (1998).Finally a small but interesting literature discusses how direct democracy shapes the size of government (see for instance Pommerehne and Frey (1978)).3 Recent classics on comparative politics include Bingham Powell (1982), Lijphart (1984), Taagepera and Shugart (1989), Shugart andCarey (1992), andCox (1997).Myerson (1998) also discusses this literature.