The Cost of Ruling. A Foundation Stone for Two Theories
University of Aarhus Department of Economics Working Paper No. 1999-9
26 Pages Posted: 16 Feb 2000
It is a robust result that the average government (ruling a normal election period) in an established democracy loses about 2% of the vote. Three explanations exist: (i) The coalition-of-minorities theory. (ii) The median-gap theory. (iii) The grievance-asymmetry theory. These theories can all be calibrated to explain the fact. While (i) is difficult to justify, both (ii) and (iii) are integrated into other theories: (ii) is integrated into the "median-voter-complex" that rules out the existence of partisan cycles. (iii) is integrated into the "loss-aversion-complex" that via the grievance asymmetry provides a "deep-parameter" explanation of the cost-of ruling. It is also an important explanation for the partisan cycle model. We demonstrate that the two complexes are alternatives and argue that the loss-aversion-complex is more powerful.
JEL Classification: D72, D78
Suggested Citation: Suggested Citation