The Dark Side of Proportionality: Two-Dimensional Coalition Bargaining and Fiscal Choices

In this paper I argue that two-dimensional coalition bargaining in national parliaments can eliminate the alleged left-bias of PR systems. Specifically, I examine the redistributive consequences of the legislative salience of geographical cleavages in 18 OECD parliamentary democracies. The main hypothesis being that the existence of a salient territorial-identity cleavage creates new opportunities for coalitions in national parliaments in which political parties trade-off nationalized public social spending against the regionalization of public policy. As such, a greater the legislative salience of the territorial dimension should be associated with i) lower national public social spending and ii) greater economic self-rule at the regional level. In order to test the hypotheses I compute the bargaining power for each party in every legislature by using the Shapley-Shubik and Banzhaf voting power indices to aggregate the legislative salience measures for both the economic and the territorial dimensions. Both hypotheses are tested with fixed effects legislature-based models and several robustness checks for endogeneity are implemented. The results in this paper fundamentally challenge some of the conventional wisdoms in the literature, since it is illustrated that it is not always the case that PR multiparty democracies redistribute more than majoritarian ones.