The impact of within-party and between-party ideological dispersion on fiscal outcomes: evidence from Swiss cantonal parliaments

Abstract

The impact of the fragmentation of executive and legislative bodies on the level and composition of government expenditure is a feature of politics that has attracted considerable attention from economists. However, previous authors have abstracted from two important concepts: ideology and intra-party politics. In this paper, we account for these two phenomena explicitly, and make two main contributions. First, we show that both intra- and inter-party ideological dispersion matter in explaining the level of sub-national public spending. Therefore, it is improper to consider parties as monolithic entities. We also show that ideological dispersion matters especially for current expenditures, and not so much for investment expenditures. To do so, we construct a panel database (2003–2010) comprising data from a survey that quantifies the policy preferences of party members who were candidates in Swiss elections.

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Fig. 1

Notes

  1. 1.

    Short-lived minority governments and pacts occurred between 1974 and 1978 and in 1997 (Maer 2010).

  2. 2.

    Australia had its first minority government in over 70 years in 2010, when the Labor Party and the coalition led by the liberals both failed to capture a majority of seats (Horne 2010). However, minority and coalition governments are more common in Australian sub-national jurisdictions. For its part, Canada was led by minority governments from 2004 to 2011 (the Parliament of Canada’s website has details on the length of all minority governments in Canadian history: http://www.parl.gc.ca/Parlinfo/compilations/parliament/DurationMinorityGovernment.aspx). Hung parliaments are more common in Canada than in Australia, although this 7-year-long string of minority governments was a first. Before that, a minority government ruled for 6 months in 1979.

  3. 3.

    These authors use two measures of ideological polarization. The first is a variable describing the maximum distance between the governing parties (the executive party and the three main coalition partners) on the usual left–right scale (taking a value of two if one party is at the right end and another at the left end), while the second is the SD of the ideology of the three main governing parties.

  4. 4.

    More recently, the emergence of the Tea Party, an American grassroots movement mostly associated with the Republican Party, is another example of a somewhat official faction, now even recognized as an official Congressional Member Organization (CMO). The relationship between the Tea Party movement in the public at large and the CMO is not clear, with many members of the former not recognizing the latter. However, the members of the CMO are supporters of the larger movement. Party factions also exist in France. Indeed, major French parties are characterized by smaller factions. For example, the Socialist Party has a social-democratic, more moderate branch, but also includes members of a more radical leftist tradition. Similarly, the Union pour un mouvement populaire is comprised of a socially conservative branch as well as a more market-oriented faction.

  5. 5.

    Swiss sub-national governments enjoy full discretion on the tax rates and the levels of tax allowances and reliefs (reductions in the amount owed). For more details, see the OECD fiscal decentralisation database, available at http://www.oecd.org/tax/federalism/oecdfiscaldecentralisationdatabase.htm.

  6. 6.

    Following the 2011 federal elections, close to one-third of the National Council members were new. At that date, the median tenure in parliament was slightly under 4 years, highlighting the fact that turnover is high in Swiss politics, at least at the federal level.

  7. 7.

    The 2011 questionnaire is available on the Smartvote website at http://smartvote.ch/11_ch_nr/questionnaire.

  8. 8.

    During the electoral campaign, voters can answer the same questionnaire on the Smartvote website and have their answers compared to those of the candidates. As a result, Smartvote matches each voter with a specific ranking of all competing candidates.

  9. 9.

    Further details are provided in a longer version of this paper, available on request.

  10. 10.

    The composition of the parliament varies following every cantonal election (or by-election), while ideology scores (the average score of, and variance within, each party) stay constant between each federal election. For this reason, our variables have at least some variation every year, if only for composition effects.

  11. 11.

    The box plots for other cantons are available from the authors.

  12. 12.

    Cantonal GDP data are not available for every year. We obtain data for GDP per capita from the Swiss Federal Statistical Office for 2003–2005. For the years from 2006 to 2010, we extrapolate the data using the national growth rate of GDP per capita, assuming that the growth rate is similar across cantons.

  13. 13.

    To obtain a causal interpretation, researchers have turned in recent years to quasi-experimental methods such as instrumental variables or regression discontinuity designs. Obviously, we would welcome the use of such methods to study the relationship between ideological dispersion and fiscal outcomes. However, our specific framework does not allow for these. The presence of endogeneity not being obvious, we believe that our results, while needing to be interpreted with some caution, are still interesting.

  14. 14.

    Ticino is an exception. For that canton, we are able to collect observations for 4 years only, thereby limiting the number of observations suitable for our model.

  15. 15.

    Using the average exchange rate over the period, this amount corresponds to 490 euros or 635 US dollars.

  16. 16.

    Using the average exchange rate over the period, this amount corresponds to 287 euros or 372 US dollars.

  17. 17.

    The effect of intra-party dispersion is larger on spending per capita than on spending as a percentage of cantonal GDP, while the opposite is true for inter-party dispersion. It is unclear whether there is any significance in this result.

  18. 18.

    The SVP is one of the largest parties at the federal level in Switzerland, as well as in many cantons.

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Acknowledgments

The authors would like to thank Julien Fiechter for access to data from Smartvote surveys, Mark Schelker for Swiss institutional data, as well as participants at the Sinergia seminar in St. Gallen, at a seminar at the University of Fribourg, three anonymous referees, Roger Couture, and the editor for helpful comments.

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Correspondence to Thierry Madiès.

Appendix: Results using total variance as the variable of interest

Appendix: Results using total variance as the variable of interest

See the Table 5.

Table 5 Regression results with total variances

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Bjedov, T., Lapointe, S. & Madiès, T. The impact of within-party and between-party ideological dispersion on fiscal outcomes: evidence from Swiss cantonal parliaments. Public Choice 161, 209–232 (2014). https://doi.org/10.1007/s11127-013-0149-8

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Keywords

  • Political fragmentation
  • Public spending
  • Political parties
  • Ideology
  • Logrolling