ECONOMY

daniel diermeier 163
It is the distinctive characteristic of parliamentary democracies that the executive
derives its mandate from and is politically responsible to the legislature. This has two
consequences. First, unless one party wins a majority of seats, a rare case in electoral
systems under proportional representation, the government is not determined by an
election alone, but is the result of an elaborate bargaining process among the parties
represented in the parliament. Second, parliamentary governments may lose the
confidence of the parliament at any time, which leads to their immediate termination.
Thus, historically, two questions have dominated the study of coalition government.
Which governments will form? And how long will they last? Institutionalism has
fundamentally changed the way researchers are conceptualizing and answering these
questions.
This chapter is designed as follows. I first discuss important empirical work that
motivated the institutionalist shift in the study of government coalitions. In the
next two sections I discuss the most widely used institutionalist approaches: Laver
and Shepsle’s structure-induced equilibrium approach and the sequential bargaining
model used by Baron and others. I then discuss two alternative approaches (demand
bargaining and efficient bargaining) to model coalition formation that try to overcome
some of the technical difficulties of older approaches. In the next two sections I
discuss the consequences of the institutionalist perspective for empirical work. First,
I review the area of cabinet stability, one of the most active areas in coalition research.
In the penultimate section I discuss recent work that relies on structural estimation
as its methodology to study coalition government empirically. A conclusion contains
a summary and discusses some open questions.
2 The Arrival of Institutionalism
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Institutionalism is difficult to define. It should not be identified with the analysis
of institutions. Rather it is a methodological approach. The common element to all
versions of institutionalism is a rejection of the social choice research program of
finding institution-free properties (as illustrated by McKelvey 1986). Beyond that, institutionalism
consists of rather different research programs that stem from different
methodological approaches.
In the context of the study of government coalition the institutionalist approach
implies a re-evaluation of existing theoretical traditions. Consider Axelrod’s (1972)
theory of proto-coalitions as an example. 3 In his model, ideologically connected
proto-coalitions expand stepwise by adding new parties until they reach political
³ Axelrod’s theory of proto-coalitions is not the only example of an “institution-free” approach to
government coalitions. Other examples include cooperative bargaining theory (e.g. the Shapley value,
bargaining set) or social choice theoretic approaches (e.g. the core, the uncovered set). For a technically
very sophisticated example of recent work in this area see e.g. Schofield, Sened, and Nixon 1998. Their
model combines social choice-based, institution-free models of cabinet formation with Nash equilibria
at the electoral level.