"The common pool problem in European Parliaments: The interrelationship of electoral and legislative institutions"

The Treaty of Maastricht established debt and deficit limits which states should meet if they are to participate in a future monetary union. This paper considers the relationship between electoral and legislative institutions on the one hand, and the size of a given European country's budget deficit on the other. Plurality electoral systems have a "winner-take-all" rule where only the top vote-getter in each district wins a seat in Parliament. One way incumbent legislators can appeal for support is to bring home particularistic benefits, such as public works projects. Since her district pays only a small portion of the central government's tax revenues, however, she will ask for more spending when the central government pays for them when they have to be paid for with local taxes. In states with proportional representation, on the other hand, candidates do not have the same incentive to offer particularistic benefits to their electorates. Parliamentary rules which restrict or eliminate the ability of legislators to amend budgetary bills will consequently have the greatest effect in limiting spending in states with single member districts. One of the most effective restrictions is that legislators can only approve or disapprove the entire budget under a "closed rule." Such rules give the government near or complete agenda-setting power. Legislators cannot attach extra spending in their districts. This theoretical point stands in contrast to authors who would predict that a move to single member districts alone in a country like Italy would lead directly to lower budget deficits. I will argue that simple change in the electoral system could lead to higher deficits if legislators are not prevented from providing particularistic benefits to their districts. Similarly restrictive parliamentary rules found in France and the United Kingdom are needed in Italy, for instance, if spending is to be limited at the legislative stage