with Felipe Carozzi and Luca Repetto
Abstract:
This paper studies how political fragmentation affects government stability. We first develop a two-period coalition formation model with heterogeneity in bargaining resources to show that more fragmented legislative may lead to more instability via two channels. The entry of new parties makes single-party majorities less likely. In addition, smaller members in coalition governments are more easily bought off by potential challengers. We test these and other predictions from the model empirically using data on over 50,000 local councils in Spain. Exploiting the existence of a 5% vote entry threshold to induce exogenous variation in the number of parties in parliament we show that an additional party increases the probability of unseating the incumbent by 3.3 percentage points. We then study the effect of bargaining resources on stability by exploiting variation in support from upper tiers of government at the party level. Local governments that are aligned with the upper tier are three times less likely to be unseated. The effects interact, so that politicians with more resources are more successful at withstanding fragmentation. We also show that challengers that replace the incumbent after a no-confidence vote are younger, more educated, have more professional experience and are more likely to win the following elections, suggesting that there may be positive consequences of instability.
