Electoral Institutions and Distributive Policies in Parliamentary Systems: An Application to State Aid Measures in EU Countries

Electoral institutions should systematically affect the propensity of a country to rely and spend on distributive measures. Supporting evidence is however still rare because of the difficulty in finding comparable cross-national data, the employment of dummy variables to account for the electoral systems, and the failure to recognise the interacting effects of different electoral rules on policy outcomes. Employing national data on state aid expenditure and a number of measures across European Union countries, the article provides evidence that legislators elected in higher magnitude districts spend less. More interestingly, it shows the interlocking policy effects of electoral institutions. Where high district magnitude is combined with ballot control, party-based voting and pooling, these rules conjunctly dampen politicians’ incentives to cultivate a personal vote and lead to lower spending on, and use of, distributive measures. Where high district magnitude is not combined with these rules, results are inconclusive. With one exception though, if leaders do not have control over the ballot rank, higher magnitude increases reliance on distributive measures. Results are robust to several alternative political-economy explanations of fiscal policy outcomes.