Do Mayoritarian Electoral Rules Favour Larger Industries in the Economy

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. This paper empirically investigates whether electoral rules have an effect –and if so, under which circumstances–on the economic performance of industries. Applying panel data techniques to an extensive dataset covering 61 manufacturing industries from 58 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 very robust evidence that large industries grow less slowly under majoritarian rules than under proportional representation and mixed systems. Based on previous theories suggesting that majoritarian rules are more likely to target narrow-interest groups, we conjecture a multilateral political linkage among officed-oriented politicians, industries and voters which might explain the differential effect of electoral rules on the economic performance of industries.