SCOPE OF GOVERNMENT: Evidence 3


Graphs 1 and 2 in the Introduction display the residuals generated by regressions of the size of government and public good provision against the parsimonious controls XB and ZB defined above. What is the pattern of these residuals across different political systems?

Before answering this question, it is useful to recall the hypotheses suggested by the theory. Consider first the size of government. The post-election politics model of Section 4 suggested that presidential regimes should be associated with smaller governments, ceteris paribus. We should thus observe predominantly negative residuals for presidential regimes and predominantly positive residuals for parliamentary regimes. The pre-election politics model of Section 3 had no immediate prediction, but an extension with distortionary taxes suggested that majori-tarian elections should be associated with larger governments, ceteris paribus. If this is correct, we should expect negative residuals for countries with proportional elections and positive residuals for those with majoritarian elections.

We summarize these predictions at the top of Graph 3. At the bottom, we display the residuals in each of the four political systems implied by our two-way empirical classification (observations are colored in the same way as in the map of Figure 5). The graph indeed indicates clear support for the post-election politics prediction: negative residuals dominate for the countries with presidential regimes (the striped observations to the right), whereas positive residuals dominate for the countries with parliamentary regimes (the solid observations to the left). It also indicates some, but weaker, support for the pre-electoral politics prediction; majority elections (darker observations) are associated with positive residuals, particularly in parliamentary regimes, whereas proportional elections (lighter observations) are associated with negative residuals, particularly in presidential regimes.

Next, consider the predictions for public good provision. Recall that our postelection politics model suggested that presidential regimes should be associated with a smaller supply of public goods than parliamentary regimes. Our preelection politics model suggested that majoritarian elections should be associated with a smaller supply of public goods than proportional elections. We summarize these predictions at the top of Graph 4. The residuals at the bottom indicate some support for the latter hypothesis; countries with majoritarian (proportional) elections indeed seem associated with negative (positive) residuals. But it is harder to discern systematic differences in the regime dimension.

Overall, these graphs support some of the theoretical predictions, though not all of them. In particular, the residuals suggest that presidential regimes have smaller governments, and perhaps that majoritarian electoral systems tend to have less public good provision. But while these graphs are suggestive, they still leave several questions open. Are the differences across political regimes statistically significant? If so, are the results robust to different specifications of the control variables, and to different measures of the dependent variables? If the political systems are correlated with the controls, how should the covariance with government spending be attributed? To address these questions, we now turn to some regression analysis. too many payday loans