Political parties and the size of government in multiparty legislatures: Examining cross-country and panel data evidence

This article tests the effect of an increase in the number of represented political parties and the size of the majority party on the size of government - proxied by central government expenditure as a percentage of GDP - in multiparty legislatures. The author argues that an increase in the number of represented parties leads to higher central government expenditure. Conversely, as the size of the majority party grows from a bare-minimum majority to above the supermajority level, it has a nonlinear, specifically "cube" effect on central government expenditure. Panel data on central government expenditure from 110 countries are used to test these arguments. The results corroborate the theoretical claims and are robust in regression models where fixed-effects were introduced and endogeneity was corrected. Finally, an increase in the number of represented parties leads to higher government spending on subsidies and transfers but to lower spending on public goods.