UCLA International Institute

The classic Stigler-Peltzman model, if extended to consider the effects of electoral systems, suggests (a) that majoritarian electoral systems should advantage consumers over producers and (b) that this effect will manifest itself in lower real prices. In an earlier paper, Rogowski and Kayser (AJPS, July 2002) demonstrated that, controlling for all other factors standardly adduced in the extensive “Law of One Price” literature, and for country size, the strongest form of majoritarianism, single member districts (SMD), predicted a ten percent drop in the real 1990 prices of the average OECD country. This cross-national effect survived a plethora of robustness checks and was not driven by any single case, including the United States.

We now extend that empirical analysis to panel data for twenty-three OECD countries over the period 1970-2000, taking advantage also of the numerous changes in electoral systems during that period (France, Italy, Japan, New Zealand). In a country fixed-effects specification (sustained by a joint test of significance on the country dummies), and particularly when missing data are addressed by multiple imputation, the electoral-system price effect is again confirmed as statistically and substantively significant. We suggest (a) that real price differences can serve as an important indicator of policy effects of various institutions and (b) that, given these results, any change in a country’s electoral system will have strong and predictable effects on the balance of consumer-producer power.