Political competition shapes public spending, driving convergence to economic fundamentals.
The article investigates whether politics or economics influence public policy decisions. By studying Canadian data over 130 years, the researchers found evidence of a political business cycle affecting government size. They explored how political competition and opportunistic factors impact public spending, aiming to determine if political factors drive public choices away from economic fundamentals in a competitive system. The study distinguishes between convergence (where public spending aligns with economic factors) and nonconvergence (where political factors prevent alignment), shedding light on the role of politics in shaping government size.