Do Majoritarian Electoral Rules Favour Larger Industries in the Economy?

Timothy Yu-Cheong Yeung (Toulouse School of Economics)
Izaskun Zuazu (University of the Basque Country)

Abstract: Electoral rules translate votes into seats on different basis. Politicians respond differently to alternative electoral rules, and consequently, economic performance is expected to vary across rules. We offer a channel through which politicians may cater for narrow-interest groups at the expense of the general public in return for monetary contributions and indirectly votes from voters. Based on previous theories and evidence in the field, we hypothesize that this channel is more pronounced under majoritarian electoral rules than under proportional representation and mixed systems. We contribute to the existing literature on the economic aftermath of electoral rules by using industrial growth rate as our dependent variable. Applying panel data techniques to an extensive dataset covering 61 manufacturing industries from 59 democracies over 1990-2010, we find that industry size --measured by the number of workers to total population-- grinds industry economic growth. However, we find a very robust evidence on that large industries grow less slowly under majoritarian rules than under proportional representation and mixed systems. This empirical result is consistent with the political multilateral relationship we propose.