This article employs a duration analysis approach to empirically investigate whether political fractionalization leads to delayed fiscal stabilizations. Using a broad sample of both developed and developing countries for the period 1975–2011, we consistently find strong evidence that political fractionalization is significantly associated with longer delays in stabilizing high deficits. In particular, political fractionalization has a greater impact on delays in periods of macroeconomic distress. We also show that, while the fractionalization of government parties delays fiscal stabilization, the fractionalization of opposition parties tends to facilitate fiscal stabilization.
- Fiscal stabilization
- Political fractionalization