Fragmented Government Effects on Fiscal Policy: New Evidence

Using a panel of 22 OECD countries over the 1971-1996 period, this paper extends previous literature on the effects of fragmented government on fiscal policy outcomes in various directions. First, we focus on data relating to central government as all theories refer to central government. Second, we also examine government's position vis-a-vis parliament and government's political fragmentation. We find evidence that more fragmented governments have higher deficits, while governments that have a large majority in parliament have lower deficits. Right-wing governments appear to have been fiscally more responsible in the seventies. Political fragmentation does not affect a government's budget deficit.