Do government formation deadlocks really damage economic growth? Evidence from history's longest period of government formation impasse

Abstract

Several countries have experienced lengthy periods of government formation deadlock in recent years, as they have sought to form a new government. This study examines whether government formation deadlocks damage a country's economy. To do so, we analyze the case of Belgium, which took a record 541 days to create a post‐election government, following the June 2010 federal elections. Employing the synthetic control method, our results show that the Belgium economy did not suffer an economic toll; on the contrary, gross domestic product per capita growth was higher than would have otherwise been expected. As such, our evidence contradicts frequent claims that long periods of government formation deadlock negatively affect an economy.

The Economic Costs of Hybrid Wars: The Case of Ukraine

“…García-Enríquez (2019a, 2019b) but also by, e.g. Albalate and Bel (2020) to estimate the effects of government formation deadlocks on GDP growth.…”

Does the Effectiveness of Budget Deficit Vary between Welfare and Non-Welfare Countries?

“…Lopez et al [22] similarly argue that QOG upholds a growth-promoting economic environment and removes obstacles from the growth process. On the other hand, Salawu et al [49] and Albalate and Bel [50] state that QOG is not the only factor to motivate economic growth; even sometimes, strong QOG slows down economic activities. Moreover, poor QOG facilitates economic growth in many developing countries [51].…”

Belgian Exceptionalism

“…Scholarly works explored the problems of public governance at the federal level and discussed reasons why caretaker governments emerge. Several structural explanations have been put forward such as the consociational system of decision-making, the electoral system, the fragmented party system, the absence of national parties and the linguistic and territorial conflicts, as well as conjunctural explanations such as the success of a nonmainstream party, the disagreement on territorial reforms, the ideological distance between the mainstream parties or even the chicken game during the negotiation talks (Albalate & Bel, 2020;Brans et al, 2016;Deschouwer, 2012;Golder, 2010;Hooghe, 2012a;Van Aelst & Louwerse, 2014). Works in the Belgian academia also question the robustness and the resilience of the political system and scholars have tried to explain how a complex country such as Belgium can continue to function even when a caretaker government is in the driving seat (Albalate & Bel, 2020;Bouckaert & Brans, 2012;Brans, 2012;Brans et al, 2016;Deschouwer, 2012;Devos & Sinardet, 2012;Hooghe, 2012a,b;Pilet, 2012).…”