Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 749: Political Polarization and the Size of Government

Erik Lindqvist () and Robert Ă–stling ()
Additional contact information
Erik Lindqvist: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, sweden
Robert Ă–stling: Stockholm School of Economics, Postal: Department of Economics, P.O. Box 6501,113 83 Stockholm, Sweden

Abstract: We study the effect of political polarization on government spending and redistribution using the dispersion of self-reported political preferences as our measure of polarization. Politically polarized countries have lower levels of redistribution and government consumption. The relationship between political polarization and the size of government is stronger in democratic countries, indicating that the effect goes through the political system. The results are robust to a large set of controlvariables, including GDP per capita and income inequality.

Keywords: Political Polarization; Social Cohesion; Ethnic Fractionalization; Social Capital; Size of Government

JEL-codes: H11; H20; H41

32 pages, May 15, 2008

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