Why are some junior coalition members able to extract significantly greater concessions from their partners than others? I argue that junior partners are able to do so if they can credibly threaten to exit the incumbent government. Such exit threats are only credible if they can enter into alternative governments that are both viable and ideologically attractive to them. Thus, I expect junior parties to extract greater concessions, the more exit power they control. I test this hypothesis on three observable implications of multi-party policy-making. First, I expect government spending to vary systematically with the strongest party;;s bargaining leverage. I find that spending only increases in the number of governing parties if the strongest party controls relatively little exit power. The effect is mitigated as its exit power increases. Second, I analyze under what conditions government parties are able to influence how expenditures are allocated across different spending areas. While all governing parties have the incentive to implement policies that reward their constituents, only exit power provides them with the means to implement their ideologically motivated spending preferences. I find that the composition of the budget reflects the spending preferences of parties with significant exit power more closely. Finally, I address why some parties receive more ministerial portfolios than others. I expect parties to receive more, and more important, portfolios if they can credibly threaten to exit current government negotiations. I present two approaches to estimate ministerial allocation data as unbalanced and irregular compositional data. In this project, I generate and use a novel measure of parties;; exit power that is comparable across countries and over time. It is theoretically motivated and captures parties;; next best options in case of a bargaining breakdown. I simulate all approximately 120,000 potential governments that could have formed in developed democracies during the postwar era. For each of these governments, I estimate its formation likelihood and its ideological appeal to each of its members. For each party in government, I calculate its exit power relative to that of its partners and use this as my main explanatory variable.
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The Empirical Implications of Inter-Party Bargaining in Multiparty Governments