Liam Anderson

The Implications of Institutional Design for Macroeconomic Performance Reassessing the Claims of Consensus Democracy

The choice between a proportional representation (PR) or plurality-based electoral system is commonly assumed to involve a trade-off. The former is assumed to provide fairer representation but at a cost in terms of stability and effectiveness. Recent work by Lijphart and others suggests that not only are PR-based (consensus) systems more democratic than plurality-based (majoritarian) systems but they are also more effective in terms of macroeconomic performance. This article offers a critical reexamination of these claims. The author provides empirical evidence that the superior performance of consensus democracy on two important macroeconomic indicators—inflation and unemployment—is driven largely by corporatism and central bank independence. After controlling for these, the results indicate that the core elements of consensus democracy are associated with higher rates of both inflation and unemployment. Whereas corporatism and independent central banks are claimed as elements of a broader concept of consensus democracy, the author argues that neither can be comfortably accommodated within the consensus framework depicted by Lijphart.