Electoral system, fiscal rule and form of government: case studies in political economics
Abstract: Political instutions are rules of the game. Rules that guide the behaviour of politicians and officials. Thus, political institutions may have far-reaching consequences and scholars as well as practitioners would like to learn more about how political institutions work and what the effects are. Among others they want to know whether political institutions are effective in guiding the behaviour of politicians.To this section 3 uncovers the effectiveness of the Swiss debt brake which requires the balance of the budget. We find that the introduction of this fiscal rule improved the cyclically adjusted budget balance by about 3.6 percentage points on average in a post-intervention period covering five years.While fiscal rules usually are implemented to affect government spending political institutionsin the form of the electoral rule or the form of government usually are altered to affect political variables like the number of parties in parliament or the leeway in decision-making of regions within a country. Nevertheless, electoral system changes or alterations of the form of government may (unwittingly) impact on economic variables like government spending or economic growth.Section 2 thus captures several changes of the electoral system. Where Japan and New Zealand switched from a majoritarian rule to a mixed-member electoral system in 1996, Italy switched from a proportional rule to a mixed-member electoral system in 1994. In 2006 Italy switched back to a proportional rule. I find an effect on the overall level of spending in the range of 2.13 to 3.36 percentage points. However, the treatment effect is either poorly statistically significant or insignificant. I find a clear significant effect on social spending in New Zealand but not in Japan and Italy.Section 4 uncovers the growth effect of federalism reforms in Belgium at the national level as well as for Flanders and Wallonia (regional level). We find a small positive growth effect of the 1989 reform in Flanders. Regarding the 1993 reform we find small negative growth effects at the national level, in Flanders and in Wallonia. Finally, we do not find a growth effect of the 2001 reform at the national level but a small negative growth effect in Flanders and in Wallonia. The results are statistically insignificant