The impact of within-party and between-party ideological dispersion on fiscal outcomes: evidence from Swiss cantonal parliaments

The impact of the fragmentation of executive and legislative bodies on the level and composition of government expenditure is a feature of politics that has attracted considerable attention from economists. However, previous authors have abstracted from two important concepts: ideology and intra-party politics. In this paper, we account for these two phenomena explicitly, and make two main contributions. First, we show that both intra- and inter-party ideological dispersion matter in explaining the level of sub-national public spending. Therefore, it is improper to consider parties as monolithic entities. We also show that ideological dispersion matters especially for current expenditures, and not so much for investment expenditures. To do so, we construct a panel database (2003–2010) comprising data from a survey that quantifies the policy preferences of party members who were candidates in Swiss elections.