Electoral Rules, Labor Market Coordination and Macroeconomic Performance

Abstract

Two distinct literatures have studied the macroeconomic effects of electoral systems and of labor market structures, respectively. Results include a positive association between proportional representation (PR) electoral systems and growth, but also between PR and inflation, as well as negative or hump‐shaped relationships between labor market coordination and the ‘misery variables’, unemployment and inflation. However, these results could be biased; particular electoral system and labor market features co‐vary systematically, and extant studies have typically not taken this into account. Effects attributed to PR systems could really stem from labor market coordination, and vice versa. In this article the relationships with macroeconomic outcomes for both electoral systems and labor market structures are re‐evaluated by modelling them jointly. Employing data from more than 30 democracies, with time‐series from the period 1960–2010, some robust and some non‐robust associations are identified. First, PR systems are, indeed, associated with higher growth rates, but not with higher inflation. Regarding labor market coordination, robust curvilinear relationships with unemployment and inflation are identified; intermediate levels of coordination correspond with worse macroeconomic performance – albeit not lower growth – even when accounting for electoral system features.

Democratising Democracy: Votes-Weighted Representation

“…Such vote weighting would not, however, correct for wasted votes for eliminated candidates or parties: to mitigate this requires actual transfers to next preferences, as under STV and its simplification, VWR. We expect our system will generally lead to coalition governments, and we and many others believe this is no bad thing, for multiple reasons which have been much discussed and debated (Bellamy, 2012), including better economic growth (Knutsen & Rasmussen, 2018) and less inequality (Zuazu, 2022). In any case, a single-party government (for example, under FPTP) is itself generally a broad, shifting coalition (albeit 'pre-formed', before the election, and voted on as such).…”

“…A criticism of PR is that it leads to coalition governments, and coalition-building can involve unpalatable deals behind closed doors -but that also happens within parties, including after elections. In any case, coalition building can improve governments (at least increasing the available talent pool), and may have a moderating influence, aligning them better to the overall population than FPTP does, stabilising policy-making (Colomer, 2012), boosting economic growth (Knutsen, 2011;Knutsen & Rasmussen, 2018) and reducing inequality (Zuazu, 2022). Another criticism of PR is that small parties can gain disproportionate power, by acting as 'king-makers'; this can be mitigated by sensible election thresholds, but all too often the price is large numbers of wasted votes.…”

“…"Over-powerful" small parties? on average, get higher growth, less inequality (Colomer, 2012;Knutsen & Rasmussen, 2018;Zuazu, 2022) Vote splitting (e.g. 'spoiler' effect can split a majority).…”