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Some electoral systems favor strong single-party majority governments, while others the formation of coalitions. Having one or the other is likely to affect economic outcomes in ways that are unintended when the electoral rules are approved. In this paper, we show that government fragmentation has large fiscal implications. We also provide results that have a causal interpretation. Using a panel of Spanish municipalities, along with a close-elections regression discontinuity design, we find that single-party majorities run budgets with a 1.5% point larger primary surplus than that of coalitions. In addition, we show that lower deficits are driven mainly by single-party majority governments' capacity to raise more revenues. These findings are robust to several model specifications. ; We would like to thank Albert Falcó-Gimeno, Elias Dinas, Sandra León, Jeffrey Timmons, Didac Queralt, Pedro Riera, and Gilles Serra for helpful comments on previous drafts of this paper. We are grateful to the Spanish Ministry of Economy and Competitiveness for financial support through Grants CSO2013-40870-R, and CSO2017-82881-R.

Spain reformed its campaign finance law twice in the first half of the nineties. Political parties that passed the new legislation claimed that their aims were equity & checking government spending in a time of recession. However they used the legal changes to attain mainly other non-declared goals such as solving their financial problems by shifting campaign costs to public budgets & improving their credibility badly damaged by the fund raising scandals reported by the media. A principal outcome of the reforms was to set an effective cap to electoral expenditure. In our view this would have not been feasible in the late seventies or eighties. Then the parties confronted a situation of parametric choice, trapped in a prisoner's dilemma in which each party had to spend more in order to prevent their rivals from getting electoral advantage. But in the early nineties the two largest parties, ridden with problems of soaring electoral debts & disgruntled voters, used the reform of electoral finance as a coordination device to achieve a Pareto efficient equilibrium. Tables, References. Adapted from the source document.

Spain started the regulation of party financing in the mid seventies when democracy was restored. This paper deals with public subsidies for funding the current expenditures of political parties. It reviews the trends in legislation & practices in political finance during the last quarter of a century. Our purpose is to find out whether the observed behavior of parties is consistent with the predictions of rational choice theory. We also suggest a new way to fund the parties that in our view would do away with most of the reported shortcomings of the present system. Tables, References. Adapted from the source document.

The literature on strategic voting has provided evidence that some electors support large parties at the voting booth to avoid wasting their vote on a preferred but uncompetitive smaller party. In this paper we argue that district conditions also elicit reactions from abstainers and other party voters. We find that, when ballot gains and losses from different types of responses to the constituency conditions are taken into account, large parties still benefit moderately from strategic behaviour, while small parties obtain substantial net ballot losses. This result stems from a model that allows for abstention in the choice set of voters, and uses counterfactual simulation to estimate the incidence of district conditions in the Spanish general elections of 2000 and 2008. ; This work was supported by the Spanish Ministry of Science and Innovation through grant CSO2008-01436.