with Felipe Carozzi and Luca Repetto
Accepted for publication in the American Economic Journal: Applied Economics
Link: Full text.
Media coverage: nadaesgratis.es
Abstract:
This paper studies how political fragmentation affects government stability. Using a regression-discontinuity design, we show that each additional party with representation in the local parliament increases the probability that the incumbent government is unseated by 5 percentage points. The entry of an additional party affects stability by reducing the probability of a single-party majority and increasing the instability of governments when such a majority is not feasible. We interpret our results in light of a bargaining model of coalition formation featuring government instability.