and political data from the World Bank’s _Database of Political Institutions_ (DPI). The fiscal variables measure total spending (excluding interest payments), total tax revenues, and fiscal deficits of central governments.<sup>20</sup> We measure coalition governments in three different ways using data from the DPI, given the finding that coefficient estimates are sensitive to the way coalitions are defined (Perotti and Kontoupoulos, 2002). The simplest measure is that of an indicator variable which equals 1 if the party of the executive leader in a country does not control a majority in all lawmaking houses, which we label “DIVIDED”.<sup>21</sup> The second measure is the probability (which lies between 0 and 1) that two legislators chosen at random from among parties that form the government will belong to two different parties, which is the variable labeled “GOVFRAC” in the DPI. The third measure is the number of political parties forming the government, similar to the measure used by Perotti and Kontoupoulos (2002), which we calculate by simply counting the number of parties listed as government parties in the DPI— “NUMBER OF PARTIES”.

We compile available data for more than 70 countries over the period 1970 – 2006.<sup>22</sup> We specify the time interval over which the variables are measured, _t_ , as a decade. We calculate decadal averages for each country in our sample, for the 1970s (1970-1979), 1980s (1980-1989), 1990s (1990-1999), and 2000s (2000-2006), using non-missing values within a decade. We analyze the correlation of political party composition of government with fiscal policy over this country-decade sample. However, there is a lot of missing fiscal data, with observations on central government total spending and taxes available only for 224 country-decades. Details of how the variables are measured are contained in the data appendix, Appendix 5, along with the list of countries for which fiscal data is available in our sample. Appendix 5 also reports the summary statistics of the variables used in the analysis.

There are several arguments for selecting the decade as the time-unit of analysis over other possible choices such as annual panels, or averages within countries between consecutive elections. First,

> 20 Persson and Tabellini (2003) also analyze only central government budgetary spending, as opposed to consolidated government spending across all tiers and including extra-budgetary accounts, because of lack of comparable data across countries. They include an indicator variable for whether a country has lower tiers of government with fiscal authority. We also check the robustness of our results to including this variable.

> 21 This is the variable used in a recent paper by Alesina, Ardagna, and Trebbi (2006) to estimate the impact of unified versus divided governments in effecting fiscal stabilization. It is conceptually the same as the measure used by Persson, Roland, and Tabellini (2006) in their work on the impact of electoral rules on public spending in parliamentary democracies. A similar measure is also used by Schwarz (2006) in his finding from over-time analysis of Germany that divided governments have higher deficits, and by Alt and Lowry (1994) and Poterba (1994) in their analysis of fiscal policy in US states.

> 22 At the outset of this research when we began compiling the data, we chose to exclude oil-rich countries in the middle-east and countries experiencing nation-wide conflict for the majority of the years of our study, to examine political effects in times of peace. We also exclude countries that had been until the 1990s or are currently under communist regimes to avoid the correlation between single-party governments and government size being driven by the specific economic and political ideologies of these countries.

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