Coalition Governments Versus Minority Governments: Bargaining Power, Cohesion and Budgeting Outcomes

Abstract

Recent empirical work investigating the role of minoritygovernments in the selection of fiscal policies has shown thatthe majority status does not affect the budget size. Thispaper presents an analytical framework which accounts for thisresult. It combines a government formation game and a budgetgame involving cabinet and parliament. A general indifferenceresult applies. An exogenous shock to the bargaininigenvironment which absorbes the cohesion of the governmentincreases the demand for expenditures. At the same time theconditions for the formation of a minority government arefulfilled. If the formateur is strong, a minority governmentcan be a device for cutting expenditures. Copyright Kluwer Academic Publishers 2004

Government budgeting, power and negotiated order

“…Contrary to the literature which shows increasing trends of spending growth Sachs, 1989a, 1989b;Edin and Ohlsson, 1991;Grilli et al, 1991;Corsetti and Roubini, 1993;Hahm et al, 1996;De Haan and Sturm, 1994;Helland, 1998;Franzese, 2002;Pech, 2004), the growth of public expenditure in Scottish government started to show a decreasing trend. Although the contributors to the debates tended to be the same, the discussion, far from being ritualistic, started to have an actual impact on the contents of the budgets, giving impetus to continual negotiations (Strauss, 1978) and strengthening the roles of some opposition parties and the Parliament (consistent with Blowers, 1977;Lyon, 1984;Thomas, 2007;Russell, 2008).…”

“…Whilst the coalition government had exhibited the facets of dispositional and facilitative power (Clegg, 1989) in controlling its budget plans, the Scottish Parliament first experience of minority government revealed the characteristic complexity of negotiations, with uncertainty over outcomes and political instability (Strøm, 1990;Laver and Schofield, 1998;Pech, 2004;Helland, 2004).…”

“…Minority governments are perceived to be "weaker" than majority ones, since they are generally supposed to require longer and more complex negotiations, to increase the uncertainty of the outcomes of decision-making processes, and thus political instability, to have shorter lives than majority ones, to lack the ability to control the bureaucracy, to be less productive and accountable to the citizens, and to generate ineffective governance (Strøm, 1990;Laver and Schofield, 1998;Pech, 2004;Helland, 2004). Nevertheless, many authors have shown that minority governments are a more common phenomenon than one would imagine (for example, Herman and Pope, 1973;Green-Pedersen, 2001) and are not necessarily less efficient or less accountable.…”

Do political variables affect fiscal policy adjustment decisions? New empirical evidence

“…In Table 5, also the variable Excess Seats becomes significant, with a negative sign. This probably reflects that in various countries ruled by minority governments, notably in Scandinavia, fiscal adjustments took place during this period, lending support to the views of Pech (2004).…”

“…However,Pech (2004) argues that a minority government can be effective in cutting expenditures. He refers to the example of the Danish minority government run by Schlüter that initiated a policy of budget consolidation.…”