Political competition shapes government size, driving convergence to economic fundamentals.
The article explores whether politics or economics have a bigger impact on public policy decisions. By studying Canadian data over 130 years, the researchers found evidence of a political business cycle affecting government spending. They investigated whether political competition leads to public spending aligning with economic fundamentals in the long run. The study suggests that political factors, such as partisan interests, can influence government size and deviate from what economic factors alone would predict.