Research has shown that government spending can affect GDP growth rates, yet there is no comprehensive study that looks at how a country's choice of political institutions affects government spending. This article focuses on how the choice of regime type (presidential, parliamentary, or mixed), legislative chamber structure (bicameral or unicameral), legislative chamber size, and electoral rules affect the level of government spending.
The methodology used is pooled ordinary least squares for an unbalanced panel of 92 democracies between 1975 and 2007.
The results show that the relationship between legislative chamber size and government spending is linear in unicameral countries but nonlinear in bicameral countries, plurality electoral rule is always associated with less spending than any other type of electoral rule, and unicameral and bicameral countries should not be modeled together.
While countries that have long-standing political institutions are less likely to change the characteristics of those political institutions in order to change the level of government spending, the results of this article suggest that countries that are establishing new political institutions (e.g., South Sudan and Libya) stand to benefit from knowing what types of institutions are conducive for growth.