Lack of consensus, dispersion of political power and public debt: evidence from a sample of developed countries

Abstract

The aim of this article is to study empirically the relationship between political governance and public debt by testing a number of hypotheses. We examine the effects of the dispersion of power on public debt with an econometric study carried out on a sample of 13 developed countries using macroeconomic and political data covering the period 1996–2012. It is found that the lack of consensus between political parties in a government coalition and the dispersion of power within the government are factors explaining the increase in public debt.