Political Fragmentation and Government Stability: Evidence from Local Governments in Spain

This paper studies how political fragmentation affects government stability. Using a regression-discontinuity design, we show that each additional party with representation in\r\nthe local parliament increases the probability that the incumbent government is unseated by 5 percentage points. The entry of an additional party affects stability by increasing both\r\nthe probability of a single-party majority and the instability of governments when such a majority is not feasible. We interpret our results in light of a bargaining model of coalition\r\nformation featuring government instability.