Political Competition Impacts on Government Expenditure Growth: an Evidence from OECD Countries

ABSTRACTPolitical competition is defined as the level of control held by individual political parties ascaptured by the measures of effective number of parties, number of parliamentary partiesetc. This article investigates the effect of political competition on the rate of governmentexpenditure growth using competing theories and panel data from 21 OECD countries. Inthe existence of political competition, neo-classical theories predict a relatively lower rateof growth, while public choice theories suggest an excessive rate. The empirical resultspresented here are more supportive of neoclassical predictions. The results also showthat competition does constrain government growth even after controlling for ideology.Furthermore, the results show that competition has a greater constraining impact ongovernment growth when there is a change in the ruling party or coalitio