Qualifying the common pool problem in government spending: the role of positional externalities

Dušan Pavlović () and Dimitros Xefteris ()
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Dušan Pavlović: University of Belgrade
Dimitros Xefteris: University of Cyprus

Constitutional Political Economy, 2020, vol. 31, issue 4, No 2, 446-457

Abstract: Abstract Under what circumstances do coalition partners tend to overspend? The so-far dominant explanation relies on the common pool resource theory—the more cabinet members there are, the higher the spending. While theoretically sound, this explanation seems to be more relevant for some cases and less for others. What could lie behind this discrepancy? While the literature to date has focused on institutional factors, we propose a mechanism that relates to voting behaviour. Relying on the concept of positional externalities, we argue that each coalition member wishes to spend relatively more resources than the other coalition member(s) to attract impressionable voters. Positional externalities, we claim, exhibit a direct positive effect on total spending and, perhaps more importantly, interact with the common pool resource factor, decreasing its relevance when they are weak.

Keywords: Positional externalities; Public spending; Common pool resource theory; Voting; Behavioural economics (search for similar items in EconPapers)
JEL-codes: E62 H30 H62 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10602-020-09306-6

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