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We build a theoretical model that provides a previously unexplored way of addressing the spending-negotiation process between a governing party and the parties in a legislature, one that offers new insights as to how political fragmentation, ideological polarization, and bargaining power-as well as their interaction with one anotheraffect government spending. We show that the effects of both political fragmentation and ideological polarization on government spending are expected to exhibit systematic differences across regimes with different institutional features as pertain to the legislative budgeting process determining the balance of power between the governing party and the legislature. We also show that the effect of political fragmentation on government spending may be intermediated by the degree of ideological polarization. Our results allow us to better understand the existing empirical evidence and suggest new unexplored hypotheses that need to be addressed empirically. E conomists and political scientists have concerned themselves with how political fragmentation affects fiscal outcomes. The leading theory in this area follows from the common-pool problem (Weingast, Shepsle, and Johnsen 1981). The general argument is that when a pool of common resources is used to finance public projects with concentrated benefits, the result is overspending. Such overspending increases with the number of interested parties that have influence over government budgetrelated choices.Cross-country studies have analyzed whether public spending and/or budget deficits increase as the number of parties in the legislature increases. Most of these studies have concentrated on OECD democracies (Bawn and Rosenbluth 2006;Kontopoulos and Perotti 1999). They have found evidence supporting the idea that the number of parties in a legislature positively affects government spending. Interestingly however, for sets of countries including non-OECD countries, they have found that the number of parties has a weaker effect on spending (Elgie and McMenamin 2008;Mukherjee 2003;Woo 2003).A growing literature in political science and economics has shown that intrinsic institutional features related to the budget-negotiation process can be important in explaining these systematic differences (Alesina et al. 1999;Cheibub 2006;von Hagen and Harden 1995;Wehner 2010). In particular, von Hagen and Harden, studying a situation in which executive spending ministers agree on a budget bill, formally demonstrate that empowering ministers without portfolio promotes fiscal discipline and reduces government overspending caused by spending ministers' fiscal illusions. The main conclusion from this analysis, which has been informally generalized to all stages of the budgeting-negotiation process, is that the balance of power emerging from institutional aspects of the budgeting process has important effects on fiscal outcomes.In this article, we offer a theoretical model that provides a way, previously unexplored, of addressing the spending-negotiation process ...

We claim that, in presidential democracies, the effect of increasing fragmentation on government spending should be conditional on polarization, defined as the ideological distance between the government's party and other parties in Congress. We build a model where this result follows from negotiations between the legislature and an independent government seeking the approval of its initiatives-as in presidential democracies. Using cross-country data over time, we test the empirical validity of our claim finding that, in presidential democracies, there is indeed a positive effect of fragmentation only when polarization is sufficiently high. The same is not true for parliamentary democracies.

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