Electoral institutions and growth volatility: Theory and evidence

Sergio Béjar, Bumba Mukherjee

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

What accounts for the substantial variation in the temporal volatility of economic growth rates in democratic regimes? We claim that institutional differences between the majoritarian and proportional representation (PR) electoral systems explain why growth volatility is high in some democracies, but not others. Specifically, we suggest that unlike PR democracies, the pronounced career concerns of policymakers in majoritarian systems give them incentives to use their discretionary spending power to alter government spending levels sharply, which generates higher spending volatility in these countries. As a result, policymakers in majoritarian systems cannot credibly commit themselves to stabilizing spending levels. This causes uncertainty among economic actors about future spending levels and leads to unstable investment patterns that generate a higher volatility of growth rates in majoritarian democracies. Results from statistical models provide robust statistical support for our theoretical predictions.

Original languageEnglish (US)
Pages (from-to)458-479
Number of pages22
JournalInternational Political Science Review
Volume32
Issue number4
DOIs
StatePublished - Sep 1 2011

All Science Journal Classification (ASJC) codes

  • Sociology and Political Science
  • Political Science and International Relations

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