power in coalitions. We include an indicator variable for whether a government can be attributed a rightwing ideology from the DPI.

Tables 7-9 report the results when including these additional indicators. Each indicator for coalition governments continues to have a statistically significant negative correlation with government spending (at the 10 percent level), but only the Number of Political Parties measure is significant in predicting lower government taxes. However, the coefficient sign on the other measures of coalitions when predicting taxes remains negative. The loss in significance may be because of the much smaller sample available for estimation when the indicators for federalism and ideology are included—sample size falls by about 40 percent—because both these indicators have several missing values.<sup>26</sup> Voter turnout is robustly associated with larger government. Federal systems are associated with smaller size of central governments, as may be expected. Right wing governments also tend to be associated with lower spending, taxes, and deficits, but the coefficient here is less precisely estimated.

A growing empirical literature documents that communities with multiple ethnic groups spend less on broad public goods from which everyone benefits (Easterly and Levine, 1997; Alesina et al, 1999; Miguel, 2001; Banerjee and Somanathan, 2001). Ethno-linguistic fragmentation may also be associated with coalition governments if the different groups organize into different political parties, or if countries with greater fragmentation choose proportional representation systems. We use cross-country data on ethno-linguistic fragmentation compiled by Persson and Tabellini (2003) to include this variable in our analysis, and report the results in Tables 10-12.<sup>27</sup> All the coefficients on coalition government in predicting government spending and taxes remain negative, but are statistically significant only for the GOVFRAC indicator in Table 11. The loss in statistical significance might be due to a loss in number of observations available when we include ethnolinguistic fragmentation in the regression, with the sample size dropping by almost 20 percent. Alternately, it may be due to high correlation between ethno-linguistic fragmentation and likelihood of coalitions. We find a positive correlation between ethnic fragmentation and deficits as in earlier work (Woo, 2003), but negative point estimates on the fragmentation coefficient for the spending and taxes equations.

In summary, we find that including a variety of potential omitted variables does not change the negative sign on any of the measures of coalitions when correlated with spending and taxes; furthermore,

> 26 Both these indicators are derived from established datasets. The proliferation of missing values seems to be a function of the subjective coding of these variables, which likely makes it more difficult to assign values to some countries under ambiguous circumstances. The reduced sample available for estimation is therefore likely to be biased towards those countries where ideology and federal structure are easier to ascertain.

> 27 We drop the indicators for ideology and federal structure from the specification including ethnic fragmentation to more precisely estimate the effect of ethnicity (which may be of independent interest) with more observations.

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