Patricia Funk and Christina Gathmann ask, How do Electoral Systems Affect Fiscal Policy? Evidence from State and Local Governments, 1890 to 2005.
Using a new data set from 1890 to 2000, we estimate how the adoption of proportional representation affects policies in Swiss cantons. We show that proportional systems shift spending toward broad goods (e.g. education and welfare bene fits) but decrease spending on targetable goods (e.g. roads and agricultural subsidies). We find little evidence that proportional representation increases the size of government. We also demonstrate that compositional changes of the legislature, i.e. party fragmentation and better representation of left-wing parties, are associated with more spending. The direct electoral incentives of proportional rule appear to reduce government spending.
Their analysis focuses on Swiss cantons (independent voting districts) and the difference between proportional representation and plurality vote with respect to government spending (2-3). They found that proportional representation shifts from local to “broad” categories, with education going up 12%, welfare up 50%, roads down 50%, and agricultural subsidies down 21% (3-4). In addition, proportional representation has an interesting characteristic: it leads to more left-wing governments (with spending up 66%), but also more party discipline, which leads to less overspending (4). In a plurality system, there is more buying of votes (4).
Aside from these, the authors also found policy differences to be smaller in a proportional system (7-8), that proportional rule governments are more likely to run deficits (20), and that their results hold for the local level as well as the canton level (30).
All in all, this is an interesting analysis, as many Swiss cantons have moved from plurality to proportional representation over the past century. I am still not enamored by the concept, though, and despite their findings, I still harbor suspicions that a PR system leads to higher government spending and more logrolling, especially as the number of parties grows large (because there are only so many portfolios you can hand out to party leaders, so in a country like Israel, where a ruling coalition could have up to a half-dozen parties, moolah and decision-making authority are the glues that bind parties together).