Political Polarization and Size of Government

Abstract

In this study, it empirically examines the impact of economic and political determinants on the economic size of the government. Political polarization is taken as the variable of interest, along with other control variables. Statistical analysis was carried out using the Ordinary Least Squares and Second Stage Least Squares methods. The scope of the paper includes 61 countries, and the time interval is between 1990 and 2015. The results of the regression analysis show that the share of public consumption spending in national income in countries where political polarization is high is declining. In addition, the increase in levels of ethnic fracturalization, democracy and government fractionalization has an increasing effect on the share of public consumption spending in national income. The study provides descriptive linkages among findings.