Does the Size of the Legislature Affect the Size of Government? Evidence from Two Natural Experiments

Previous empirical studies have found a positive relationship between the size of legislature and the size of government. Those studies, however, do not adequately address the concerns of endogeneity. In contrast, this paper uses variation in legislature size induced by statutory council size laws in Finland and Sweden to estimate the causal effect of legislature size on government size. These laws create discontinuities in council size at certain known thresholds of an underlying continuous variable, which make it possible to generate ?near experimental? causal estimates of the effect of council size on government size. In contrast to previous findings, I find a negative relationship between council size and government size: on average, spending and revenues are decreased by roughly 0.5 percent for each additional council member.