DP2742 Electoral Rules and Public Spending

Author(s): Gian Maria Milesi-Ferretti, Roberto Perotti, Massimo Rostagno
Publication Date: March 2001
Keyword(s): Electoral Rules, Proportionality, Public Spending, Transfers
JEL(s): H11, H55
Programme Areas: International Macroeconomics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2742

We study the effects of electoral institutions on the size and composition of public expenditure in OECD and Latin American countries. We emphasize the distinction between purchases of goods and services, which are easier to target geographically, and transfers, which are easier to target across social groups. We present a theoretical model in which voters anticipating government policymaking under different electoral systems have an incentive to elect representatives more prone to transfer (public good) spending in proportional (majoritarian) systems. The model also predicts higher total primary spending in proportional (majoritarian) systems when the share of transfer spending is high (low). After defining rigorous measures of proportionality to be used in the empirical investigation, we find considerable support for our predictions.