“Divided They Fall. Fragmented Parliaments and Government Stability”

with Felipe Carozzi and Luca Repetto

Revise and Resubmit at the American Economic Journal: Applied Economics

Link: Latest Version (February 2020); CEMFI WP (May 2019); Uppsala University WP (March 2020); CESifo WP (April 2020); CEPR DP 14619 (April 2020)

Blog article: nadaesgratis.es


This paper studies how political fragmentation affects government stability. Exploiting variation in the number of parties induced by a 5% vote share entry threshold in Spanish local councils, we show that the entry of an additional party in Parliament increases the probability of unseating the incumbent by 4 percentage points. We also document that mayors with more resources at their disposal for legislative bargaining are half as likely to be unseated. Challengers are younger, better educated, and more likely to win the following elections, suggesting that instability may induce positive selection on politicians. We interpret our results in light of a two-period bargaining model of coalition formation featuring government instability.