Electoral Systems and Economic Policy

This chapter discusses recent theoretical and empirical research on one feature of modern democracies: the electoral rule. Our central conclusion is that the electoral rule systematically shapes economic policy. We show that to understand the extent of political corruption, the devil is in the details of electoral systems, such as the ballot structure or district magnitude. In the case of the size of government and fiscal policy outcomes, the effects are associated with the broad distinction between proportional vs majoritarian systems. The effects are often large enough to be of genuine economic interest.