Voting power in political decision making process and its impact on macroeconomic indicators

The relation between economy and politics shows itself in its sharpest way in the economy politics of the governments. These policies and their impacts on economy always attracted deep interest of economists and politic scientists. This intense interest policies arouse interest to the relation between democratic climate and economy of governments which decide the policies. However not having either theorical or practical precise result between democracy and economic variables, researches consequently shifted to the stability of the present political system rather than democratic climate. Formation of indicators of the political instabilities depending upon the factors which became prominent in political instability is done by adhering to two different criteria. These criteria can be defined as instability criteria out of parliament and parliament based instability criteria. Researches between politic instability and economic performance have resulted in politic instability affected especially economic growth, inflation and employment one-to-one. The aim of this thesis is to add one more variable to the variables found in political instability literature and put forward its relation with macro-economic variables. These variables are voting power. Voting power expresses the power of opposition parties and ruling party in any decision making process. Voting power which expresses the power of the opposing voters against each other in decision mechanisms is relatively the power of political parties who were sent to the national assembly by the ruled. Another aim of the thesis is to analyse the effects of voting power on macroeconomic variables; economic growth, employment, inflation which are mostly used in instability literature and Normalized Banzhaf Index value which is formed regarding to the election results of 47 countries in the 1987-2009 period after showing that political instability variable may be used in the place of voting power. The effect of voting power index values on macroeconomic variables is tested via panel data analysis method. According to the analysis results, it is seen that voting power values are effective on all of three economic variables (inflation, growth and employment), total power index values of the coalition parties and the governing party are directly proportional with growth and employment and inversely proportional with inflation under both simple and qualitative majority rule and significant results are obtained for all the variables. While the power voting index of the main opposition parties and inflation has a directly proportional effect, it is observed that it has inversely and meaningful relation with growth and employment under the rule of qualitative majority rule.Key Words: Power Index, Simple majority rule, Qualitative majority rule, panel data analysis, political instability, democracy, voting power, normalized Banzhaf Index