Coalition Formation in Parliamentary Systems: Positional Advantage and Agenda Setting, Study notes of Italian Language

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12/5/

Coalition theory: a veto

players approach

By

George Tsebelis

UCLA

I want to thank Herbert Doering, Tasos Kalandrakis, Amie Kreppel, Jeff Lewis, and Francesco Zucchini for stimulating advice. I want to thank Paul Warwick for providing me with his dataset and endless support. Finally, I thank Eun Young Ha for quality and efficient research assistance.

COALITION THEORY: A VETO PLAYERS APPROACH

Empirical research indicates that the policy positions of parties affect the coalition formation process. But theories of coalitions for the most part have not paid attention to the reasons why the policy positions of parties matter. The most theoretically sophisticated non-cooperative game theoretic models assume parties minimize distances, and calculate the “continuation value” of the coalition formation process. This article presents a veto players approach to coalition formation, which pushes the logic of non cooperative game theoretic models one step further: I argue that the reason that policy positions matter in coalition formation is that governments in Parliamentary systems control the agenda of the policymaking process. As a result, the positional advantages that a government may have (central policy position of formateur, fewer parties, and small policy distances among coalition partners) will become more necessary as the institutional agenda setting advantages a government has at its disposal decrease. Empirical tests using interactive terms between policy positions and institutional agenda setting rules corroborate these expectations.

COALITION THEORY: A VETO PLAYERS APPROACH

Theories and empirical research on coalition formation have been a very important part of political science for the last fifty years. From the normative problems of the correspondence between elections and governments, to the positive questions of which governments are likely to be formed, to the empirical questions of which characteristics of potential governments are likely to prevail, coalition theories have been one of the most important research issues in political science, and probably the modal question with respect to Parliamentary systems. The analysis is particularly difficult if one thinks that n parliamentary parties can form 2n-1 coalitions, half of which have a majority of seats. So, any particular prediction of the composition of a government has a very low probability of success. Even if one offers a solution concept that provides several possibilities (like the famous Minimum Winning Coalitions (Riker 1962)) the ratio of success indicates that the task is very demanding. The combination of importance of the issue of governance along with the difficulty of solution of the coalition formation problem have made coalition theories “simply one of the most important substantive projects in political science” (Laver and Schofield 1990:89). I will review a series of theoretical approaches on coalition formation that have ranged from intuitive concepts generated from cooperative game theory (like minimum winning coalitions, minimum bargaining solutions, minimal coalitions), to analyzing the positional characteristics of government parties (centrality, small number of parties, ideological proximity), to considering the institutional features of the bargaining environment (selection of the formateur party, vote of investiture, exclusive jurisdiction

of ministers). I will argue that the overwhelming majority of these approaches – even when they make predictions about the policy preferences of government parties – do not focus on the fundamental reason why these policy positions matter. Actually, they use policy positions along with payoffs for participation in government in order to calculate the “continuation value” of the coalition formation game (to be explained in the literature review). I have argued (Tsebelis 2002) that governments in Parliamentary systems control (more or less) the policymaking agenda, and consequently they are (more or less) able to select the outcomes that they most prefer (subject to Parliamentary approval). I have also argued that agenda setters are more influential the more centrally located their policy preferences are among the actors that are required to approve their proposals (veto players). This is a different argument from the “continuation value” of coalition formation as currently proposed (although not incompatible with it). Only one other approach (Laver and Shepsle (1996)) focuses on the agenda setting role of the government, but assumes that the ministers have exclusive jurisdiction over policymaking, and consequently, rejects the collective responsibility of governments. If governments are interested in the policymaking phase (not just the coalition formation game), then, they will try to become more influential either by using positional advantage (centrality) or the institutional advantage provided to them by existing legislation. Given that institutional advantage precedes the coalition formation process, parties will try to compensate for the lack of institutional advantage by improving the positional advantage of agenda setting. Actually, the lack of institutional advantage is a sufficient (but not necessary) condition for the development of positional advantage. This

is the major argument presented and tested in this paper: positional advantage (in the form of centrality of formateur or ideological proximity of government parties) will be more sought in countries where agenda setting rules are less favorable for governments. Again, note that I do not expect the reverse to be true. In order to develop this argument, I will need to discuss a body of literature which is not usually connected to arguments about coalitions: the literature on agenda setting in Parliamentary systems (Doering 1995a,b,c) and the literature on Executive dominance (Lijphart 1999). Then I will present my expectations, and empirical tests corroborating them. The paper is organized in four sections: The first discusses the coalition formation literature. The second considersthe executive dominance and agenda control literatures. The third explains how they can be merged to form expectations on the subject of coalition formation. The last part presents the empirical tests of the theory. I. THEORIES OF COALITIONS I produce a very partial and incomplete account of coalition formation models. I have ignored models that deal with elections and coalition formation (Austen-Smith and Banks (1998), Lupia and Strom (1995)); I do not discuss arguments that coalitions are formed so that party leaders will keep their position (Luebbert (1986)). This is because my goal is to present the models that will lead me to the discussion of arguments so far ignored by the coalition formation literature. The initial coalition theories, based on cooperative game theory, were policy blind. The coalitions that would form would include only the parties that were necessary to form a winning (majoritarian) coalition. The most famous of these theories was

presented by Von Neumann and Morgenstern (1944) and used in coalition theory by Riker (1962): the minimum winning coalitions (MWC). Other policy blind models took the MWC principal and tried to restrict it further, either by minimizing the number of seats that such a coalition has, or by minimizing the number of participant parties (Leierson (1966)). Empirical research (Browne et al., de Swaan) indicates that these models did not have significant explanatory power. These models are very simple, but as long as one keeps the zero sum game assumption of politics as a building block of the coalition model, the final outcome will be a minimum winning coalition model regardless of whether the argument is based on cooperative or non-cooperative game theory, and regardless of the level of complication (Baron and Ferejohn (1989)). The next step was the introduction of policy considerations into these models in order to increase their accuracy, with first the work by Axelrod (1970) who introduced the concept of minimum connected winning coalitions (MCWC). In a one dimensional space a “connected” coalition would not exclude a party located between coalition participants. The concept was well defined in a single dimension, but was difficult to expand in multiple dimensions (see Garrett and Tsebelis 1999). The next step in the coalition formation theories were spacial models in one or multiple dimensions. The difference between the two is extremely consequential, because in a single dimension there is an equilibrium policy (the median voter) while in multiple dimensions usually there is no equilibrium, so, the results do not generalize from one to multiple dimensions. In a single dimension De Swaan (1973: 88) assumed that “an actor strives to bring about a winning coalition in which he is included and which he expects to

adopt a policy that is as close as possible… to his own most preferred policy” and came to a criterion similar to the MCWC one. In multiple dimensions Laver and Schofield (1990), Sened (1995, 1996), Schofield (1995), McKelvey and Schofield, developed models which address the lack of equilibrium by identifying other solution concepts that would produce centrist results even if there is no “core” (that is, a set of outcomes common in all possible majority coalitions. These models produced expectations that government coalitions will be centrally located, but because they were based on cooperative game theory (where agreements are enforceable) they ignored the institutions that regulate coalition bargaining, in particular the importance of a “formateur” party, that is, a party which is assigned the task to form the government. This party is selected by the head of State (King or President), who by this action is selecting the future prime minister. It is possible that the rules for this selection are mentioned in the constitution, or the head of state obeys strong norms. Non-cooperative game theoretic models paid attention to this institutional detail, and depending on the rule of selection developed very different outcomes of the coalition formation process. In particular Baron (1991) with a model involving three parties in two dimensions uses either a sequential rule for the selection of a formateur, or a random selection rule (where the probability of selection of a party is proportional to its size). The outcomes of each process are significantly different. The logic of Baron’s model is that the formateur will apply a mixed strategy regarding which party he will make the offer to join him in the government formation, and that each party will estimate its “continuation value” in the government formation game, that is, will see what is its own utility from

rejecting the offer and letting the game continue according to the rules. In equilibrium these utilities would be equal to each other (the proposing party is indifferent between the two alternative proposals it can make, and both recipients are indifferent between accepting and rejecting). As a result of this logic, “Equilibrium policy proposals reflect the preferences of the parties out, as well as in, the government” (Baron 1991: 156) Another property of the model is that “The policies considered here are not intended to represent policies that need either legislative approval or agreement within the cabinet for their implementation. The formation of a government thus need not be cemented by the allocation of portfolios or ministries but, instead, is identified by a policy program that is sustained by a majority on a vote of confidence” Baron (1991:139- 40). There are two central ideas in this statement. The first is that coalition bargaining is distinct from policymaking. The second is that the model ignores portfolio allocation. As a result, it cannot produce any other outcome but majority coalitions. None of these features are necessary conditions of non-cooperative game theoretic models. Let me consider the latter point first. Crombez (1996), Diermeier and Merlo (2000), and Kalandrakis (2000) have used models involving payoffs based on both policy positions and participation in government and have produced non cooperative game theoretic models which produce minority or oversized governments as equilibria. All of these models are essentially producing “existence” theorems, they demonstrate that it is possible to understand these outcomes as equilibria in some game. What is interesting to note however, is that any model including the policy positions of parties in the goals of parties to be optimized comes to the conclusion that centrist parties will participate more often in governments.

However, from the perspective of this paper, the more interesting of Baron’s points is the first: the agreements examined in his model are independent from ratification by parliaments or governments. Yet, the reason that governments are formed is the selection and implementation of policies. Again, this is not a necessary assumption in Baron’s model. To the extent that one thinks that policymaking is essential for government formation, one can include features of policymaking into a non cooperative game theoretic model. So far, there has been a model that focuses on policy production and implementation: Laver and Shepsle’s (1996a, 1996b) model of portfolio allocation focuses on the agenda setting role of government. The model assumes that each minister has exclusive jurisdiction over his area of expertise, and that agreements are not enforceable, so, each minister will implement his own preferences when he receives his portfolio. Consequently, the only choices available in the coalition formation process are which portfolio will be allocated to which party (this way the infinite space of outcomes that defeat the status quo in a multidimensional model gets reduced to a finite one). This model has the additional advantage of coming to specific predictions, not just producing existence results. However, Warwick (1996) has raised serious questions about the empirical reliability of this model. In this paper, I take a different tack from both Baron and Laver and Shepsle: governments (unlike Laver and Shepsle) will be assumed to have collective responsibility and select and implement the agreements they make. Also, (in contrast to the Baron approach) these agreements need to be ratified by Parliament, and here one has to examine the institutions regulating the interaction between governments and parliaments

(“agenda setting” or “executive dominance”) because governments may have more or less power to do what they wish, and this information should enter into their calculations of what coalitions should form. II. EXECUTIVE DOMINANCE, AND AGENDA CONTROL A major distinction among different countries in political science is their regime type: presidential and parliamentary systems. The distinction among these regimes is clear: a division of powers in Presidential systems (stemming from separate elections of the executive and legislature and the lack of political responsibility of one to the other), and a collaboration of powers in Parliamentary systems (stemming from the election of the legislature, and the ability of the legislature and the executive to dissolve each other and go back to elections). The literature on the subject of these distinctions and on the characteristics of different systems is expansive (for a recent literature review see Elgie (2005)). More recently different approaches to the subject of regime type have emerged. They unify different regimes and examine properties regardless of regime type. The first is Lijphart’s consociationalism approach as presented in his books Democracies (1984) and Patterns of Democracy (1999); the second is Veto Players (2002). Lijphart is interested in whether regimes are majoritarian or consensus, that is, whether they assign decisions to a simple majority of the people or to as “as many people as possible” (1999: 2). Veto Players focuses on how many individual or collective actors need to agree in order to change the status quo. Both of these approaches identify differences between Presidential and Parliamentary systems but not in a systematic way as implied by the definitions in the

regime types literature. For Lijphart the difference exists in the “executive dominance” variable, which we will discuss extensively below in this section. For veto players, it is the number of veto players and their ideological distances that differentiate among countries (Presidential systems having more of them on average) as well as the issue of agenda setting: in Presidential systems the legislative agenda is controlled by the legislature; in Parliamentary systems by the executive. Other rational choice models also point out that agenda setting is a major difference between Presidential and Parliamentary systems (Persson and Tabellini 2000, Diermeier and Feddersen 1998). These analyses lead to the implication that policymaking power is concentrated in the hands of governments in Parliamentary systems and in the hands of parliaments in Presidential ones; exactly the opposite of what their names would suggest. Let us now focus on Lijphart’s “executive dominance” variable which measures “the relative power of the executive and legislative branches of government”(1999:129) For Lijphart, “For parliamentary systems, the best indicator is cabinet durability.” (Emphasis added). He goes on to differentiate his approach from what he calls the “prevalent” point of view according to which “cabinet durability is an indicator not just of the cabinet’s strength compared with that of the legislature but also of regime stability” (1999: 129). Lijphart cites Warwick’s theory as an example of this point of view^1 and contrasts this approach with Siegfried’s (1956) and Dogan’s (1989) analyses according to which the shift in ministerial personnel does not affect policies. According to Lijphart, the literature he cites agrees that cabinet durability is an indicator of executive dominance. The disagreement is whether government stability has (^1) “A parliamentary system that does not produce durable governments is unlikely to provide effective policy making to attract widespread popular allegiance, or perhaps even to survive over the long run.” (Warwick (1994: 139).

an effect on the regime, and Lijphart and Siegfried and Dogan argue that it has no effect, while Warwick and most of the coalitions literature argue the opposite. Lijphart does not present a logical argument connecting government duration and executive dominance; the connection appears to be self-evident. But government duration is logically independent of government power. Government duration is a function of when the government in power resigns or is voted down by parliament. Government resignation is an indication of a political disagreement between government and parliament, and whenever such a disagreement occurs the government will have to resign whether or not it is strong, or parties participating in a government for their own reasons will create disagreements in order to lead to the formation of a new government. None of these calculations has a systematic correlation with the power of the current government. INSERT TABLE 1 Be that as it may, Lijphart constructs executive dominance based on government duration in the following way. He first measures the average cabinet life of governments where the only feature that counts is party composition (governments with identical party compositions are counted as one even if the Prime Minister resigns, or if there is an election). This is the first column in Table 1. He then measures the average cabinet life using several additional events as marking the end of a government: elections, change in primeministership, change in the minimal winning, oversized coalitions, or minority status of a cabinet. This is the second column in Table 1. The average of these two measures is produced in Lijphart’s (1999) Table 7.1 (column 3 in Table 1). But there are some additional steps necessary for the creation of the “index of executive dominance.” Here is the description of the rest of the process: “Two important adjustments are

required to translate the averages in the third column of Table 7.1 into a satisfactory index of executive dominance. First, some of the averages assume extreme values. Botswana, which has one-party cabinets made up of the Botswana Democratic Party from 1965 to 1996, is the most glaring example. Its four-year election cycle reduces the average duration in the third column to 17.63 years, but this is still more than three times as long as the average of 5.52 years for Britain- and there is no good reason to believe that the Botswana cabinet is three times as dominant as the British cabinet. Accordingly, any values higher than 5.52 years in the third column are truncated at this level in the fourth column. A much greater adjustment is necessary for the presidential systems and for the Swiss separation-of-powers system. In four of the six cases, cabinet duration gives a completely wrong impression of the degree of executive dominance.... Switzerland is a prime example of executive-legislative balance. Hence, I impressionistically assign it a value of 1.00 year. The same is appropriate for the United States and Costa Rica. On the other end France must be assigned the highest value for executive dominance- the same as Britain’s....” (Lijphart 199: 133-34). Eleven out of the thirty-six countries in Lijphart’s study are assigned impressionistic values on the executive dominance index because the duration of their governments expressed as the average of the two measures had nothing to do with a balance of power between legislative and executive branches. Lijphart’s classification has the major advantage that it covers both presidential and parliamentary regimes (although in this paper we will deal only with parliamentary systems and coalition governments). So, despite the logical or procedural objections that one may have for the “executive dominance” variable, it is an indicator of what a prominent political scientist believes to be the relationship between executive and

legislative and as such I will use it in the analysis that follows and the empirical results will demonstrate that it is relevant. A more convincing and theoretically coherent approach of the relationship between governments and parliaments is offered by Doering (1995a,b,c) in a series of articles about agenda setting. INSERT TABLE 2 The power of agenda setting is the reason that governments in parliamentary systems dominate the policy making process, since they are able to select and propose among the multiple possible solutions that would be accepted by the Parliament, the one that they prefer, and they have the institutional means to defend it and prevent it from being altered on the floor of the Parliament. This of course is a very general idea, and different countries have different combinations of institutions at the disposal of governments, which requires a thorough analysis to identify and evaluate. Doering identifies seven variables that contribute to the agenda setting powers of governments when producing ordinary legislation. I will present the variables and their values for the eighteen countries covered in the Doering volume and then explain their significance. This is a summary of Doering’s variables, and is presented here so that the reader will appreciate the scope and breadth of the institutional analysis undertaken. This is the first time that institutions have been analyzed in such a complete, consistent, and multidimensional way.

1. Authority to determine the Plenary Agenda of Parliament. This variable has seven modalities; the two extremes are that the agenda can be determined by the Government or by the Parliament alone. Here is the entire list of possibilities.

I. The government sets the agenda alone. II. In a president’s conference the government commands a majority larger than its share of seats in the chamber. III. Decision by majority rule at president’s conference where party groups are proportionally represented. IV. Consensus agreement of party groups sought in president’s conference but the plenary majority can overturn the proposal. V. The president’s decision after consultation of party groups cannot be challenged by the chamber. VI. Fragmentation of agenda setting centers if unanimous vote of party leaders cannot be reached. VII. The Chamber itself determines the agenda. This is the most important variable, although it guarantees only that the subjects proposed by the governments will be discussed, not the outcome of the parliamentary debates.

2. Money Bills as Government Prerogative. While this prerogative belongs to the government in all countries, in some countries members of parliament are restricted from proposing money bills. Others do not permit their MPs to propose Money Bills, and one (Greece) applies some restrictions.
3. Is the Committee Stage of a Bill Restricted by a Preceding Plenary Decision? Most countries enable committees to play a serious role in the legislative process, while in three countries (Ireland, Spain and the U.K.) the floor refers the bill to committees. In Denmark the floor decision is not strictly binding.

4. Authority of Committees to Rewrite Government Bills. The question addressed by this section is on which text the floor decides? Does the government bill reach the floor with comments by the committee, or does the committee amend the government bill and submit its own proposal to the floor? There are four different possible answers: I. House considers original government bill with amendments added. II. If redrafted text is not accepted by the relevant minister, chamber considers the original bill. III. Committees may present substitute texts, which are considered against the original text. IV. Committees are free to rewrite government text.
5. Control of the Timetable in Legislative Committees. This issue combines the answers to two different questions: “Firstly, is the timetable set by the plenary parent body or by the committee itself? Secondly, may the plenary majority reallocate the bill to another committee or even take a final vote without a committee report, or does the committee enjoy the exclusive privilege of debating a bill as long as it thinks fit with no right of recall by the plenary?” (Doering 1995a: 237) The combination of the answers produces the following classification. I. Bills tabled before the committee automatically constitute the agenda. II. The directing authority of the plenary body with the right of recall. III. The committees themselves set their agenda but right of recall by plenary exists. IV. House may not reallocate bills to other committees.

6. Curtailing Debate before the Final Vote of a Bill in the Plenary. Three questions are answered by the following classification. “1. May an exceedingly short time limit to curtail debate for the final vote be unilaterally imposed in advance by the government or its simple majority in the plenary over which the government normally commands? 2. May a limitation of debate only be imposed by mutual agreement between the parties? 3. Is there neither advance limitation nor possibility of closure of debate, thus theoretically opening up unlimited opportunities for filibustering?” (Doering 1995a: 240) The eighteen countries fall in one of the following categories. I. Limitation in advance by majority vote. II. Advance organisation of debate by mutual agreement between the parties. III. Neither advance limitation nor closure.
7. Maximum Lifespan of a Bill Pending Approval After Which It Lapses if not Adopted. The shorter the lifespan of a bill if not adopted by parliament, the more imperative the agenda setting power of the government. The lifespan of bills vary significantly by country from a six-month or one year period to an infinite span. I. Bills die at the end of session (6 month - 1 year) II. Bills lapse at the end of legislative term of 4-5 years. III. Bills usually lapse at the end of legislative term but carrying over is possible. IV. Bills never die (except when rejected by a vote). INSERT TABLE 2 HERE Table 2 provides the score each country receives in each of the seven agenda control variables, along with the first factor of a principal components analysis that I performed (the first eigenvalue explains 47% of the variance) and normalized the

weighted sum (Tsebelis 2002). Other researchers have also focused on the study of agenda setting (Cox and McCubbins, Rash and Tsebelis), but for the time being Doering’s assessment of agenda setting powers remains the most advanced indicator in the literature of parliamentary systems ten years after it was produced, because he has compiled a series of objective indicators about who can place items on the agenda and whether they can reduce discussion time on the floor or in the relevant committees. Another advantage of Doering’s indicator is that it applies to countries regardless of regime type as the fact that he has classified non parliamentary systems like Switzerland as well as semi presidential ones like France along with the Parliamentary systems of the other Western European countries indicates. Doering’s agenda control and Lijphart’s executive dominance indicators revolve around the same idea: the ability of governments to select the policies they prefer as opposed to having them massively amended by Parliaments. If this is correct, the agenda control indicator should be highly correlated with Lijphart’s “executive dominance” variable.^2 In addition, Doering’ analysis reflects agenda setting institutions alone, while Lijphart’s classification may also include positional advantages of governments. This would be a problem if one wanted to separate institutions from positions, as we will do in the next section. Having discussed two different groups of theories, it is now time to connect them and show the relevance of agenda setting for coalition formation. III. VETO PLAYERS: MERGING COALITION THEORIES AND AGENDA CONTROL (^2) Actually, the correlation between Doering’s agenda control and Lijphart’s executive dominance is r=. 496 (significant at the .05 level) which is higher than the correlation between Lijphart’s own indicators of executive dominance and government duration (r=.2, and non-significant).

There are a series of findings replicated in the empirical literature that could be attributed to several theoretical approaches, and then there is one that seems like an orphan, has been left unchallenged (empirically) and unexplained (theoretically). I am going to explain these findings through a combination of the coalitions theories presented in the first part of this paper, and the agenda setting ones presented in the second. The findings that corroborate several theories are the following two: first, government formateurs are parties centrally located; second, other parties participate in governments with a higher probability the closer they are ideologically to the formateurs and the further the formateurs are from the center of the political spectrum. The finding that is an orphan in that government characteristics not parliamentary ones account for the longevity of parliamentary governments. The centrality of government formateurs and parties has been tested by Warwick (1998) and confirmed through a different methodology by (Martin and Stevenson (2001)). Warwick tests theoretical models by Crombez (1996) based on non-cooperative game theory and Sened (1995, 1996) based on cooperative game theory. However, other models that include ideological positions of parties come to similar conclusions. The reason is that centrist parties (if they are selected as formateurs) can find parties located close to them on every direction in space while for extremist ones this is only true towards the center. Non-centrist parties (if they are selected as formateurs) can find more parties close to them towards the center than at the extremes (actually they may not find other extremist parties if they are extremists themselves). Given that all the ideological models include minimizing ideological

distances as one of the components of party goals (the other being maximizing government seats for each party) centrist governments will indicate a higher goal achievement than extremist ones. The other empirical finding that is surprising given most of the models presented in the literature is that government survival depends on government characteristics (decreases with the number of parties in government and their ideological distance) and not on Parliament characteristics as different coalition theories predict. The reason that it is surprising is that game theoretic models of coalition formation calculate the “continuation value” of the different party moves, that is, what will happen if a proposal is not accepted. All these calculations are based on the characteristics of the parliament that forms the different coalitions, since it is the parliament that will accept or reject any coalition formation. One could think that government and parliament characteristics correlate, since multiparty systems generally give birth to multiparty governments. This expectation on the average is true, but there are several multiparty systems that generate single party minority governments (Norway), or, even single party majority governments (Greece). When Warwick (1994) introduced both parliament and government characteristics in his empirical estimations of government duration the parliamentary features dropped out and only the number of parties in government and their ideological distances remained significant variables. Here is a unified framework that explains all of these empirical features and generates additional empirical expectations that will be corroborated in the final part of this paper.

Parties participate in parliamentary government because they are strongly interested in policies and because governments control more or less the agenda in parliamentary systems. Discussing the issue of agenda setting Tsebelis (2002) has argued there are institutional, positional, and partisan advantages. In the coalition formation game we ignore the partisan advantages (since we are discussing coalitions it means that there are no stable partisan majorities) and we will focus on institutional and positional advantages. INSERT FIGURE 1 First let us explain why coalition partners prefer to minimize the ideological distances among them. In figure 1 party A is a formateur, and has a choice among two possible situations: the two other coalition partners are closer to it (parties B1 and C1) or further away (parties B and C). Figure 1 shows that no matter where the legislative status quo is located party A will have more options in coalition AB1C1 than in coalition ABC. The reason is that the winset of the SQ with respect to ABC is contained within the winset of AB1C1, no matter where SQ is. Consider two possible (and admittedly extreme) scenarios that party A has to face. The coalitions that it will form are either ideological or pragmatic. If they are ideological they will try to shape the political environment, and write down a program of political aspirations that they will try to implement. These programs will contain more elements the closer the parties are to each other. If the coalitions are pragmatic they will try to respond to exogenous shocks, and if they are able to agree on the possible responses, they will survive parliamentary fights; if not they will have to resign and coalition negotiations will start over again.

Obviously the distinction between ideological and pragmatic governments is a methodological one, since every government has some policy plan which it tries to implement to begin with, and all governments have to face exogenous shocks to the political system (that is, situations they did not expect or anticipate). But what is interesting to observe is that no matter what the government and no matter what the environment, minimizing the distances between the coalition partners is the dominant solution in all cases: whether it is because the program will include more items, or the government will have a higher probability of survival or both, and whether both potential coalitions are of the same mixture or of different mixtures between ideological and pragmatic, the formateur should select parties closer to his preferences. So, the reason that parties minimize the distances among coalition government partners is because they control the agenda and as a result they will be able to implement more plans, or respond to more shocks the closer they are to each other. But why should the formateur be a centrist party instead of an extremist one? Think of a party without a parliamentary majority (say the formateur of a parliamentary government) who has to select or not partners for a coalition. INSERT FIGURE 2 Figure 2 presents a 5 party parliament with parties of relatively equal strength (a majority requires three of them) and explain why it is more reasonable that the formateur will be selected in the center of the political spectrum (party G) and will select other parties as a function of the agenda setting powers available.

Any one of the peripheral parties will require forming a stable 3 party majority. In order for this majority to include party G (like ABG or BCG) the formateur party will have to offer G more policy advantages than it could get by itself (otherwise G would not be willing to participate in government), and if it does not include G (like ADC or BCD) they will have to be able to make proposals that will get a majority despite the lack of support by G. In all cases, the analysis would have to include what G is able to do by itself in terms of policy. The entire policy space can be divided into three mutually exclusive and collectively exhaustive subsets: the points preferred to G by majority (the interior of two lenses called GG’ and GG” in the figure), the points for which a majority is indifferent to G (the boarder of the two lenses), and the points that are defeated by G by a majority (the rest of the plane). As a result G will be a very expensive partner to be included in a coalition, and a coalition without it, has very little chance of policy success. Chances are that nobody else will be nominated to form a government, and even if they were, they would not accept the offer. What about G? I will examine the policy advantages that G has if he forms a minority government under different agenda setting rules. First, I will consider a closed rule (the government can bring a “take it or leave it” proposal on the floor of the Parliament. Then, I will consider an open rule according to which members of parliament can modify the government’s proposal anyway they want. Finally I will consider agenda setting rules that include the ability of the government to make the last amendment on the floor of the parliament (think that the corresponding minister

can offer the last amendment, or an MP who belongs to party G). This rule is what Weingast (1992) has called “fighting fire with fire” and Heller (2001) has demonstrated that it exists in many countries.

1. Under closed rule, G can have its own preference voted by a majority in Parliament as long as the status quo (SQ) is not included in the lenses GG’ or GG”. From the Figure it is obvious that as G approaches the intersection E of the two diagonal lines connecting the 4 extreme parties the size of these lenses shrinks.^3 If the status quo is located inside the shaded part of the lenses, the government cannot guarantee itself of a better outcome, so it will probably leave the status quo as is. If it is in the non-shaded part of the lenses, it can propose something inside the shaded area that will prevail (the symmetric of SQ with respect to the corresponding diagonal gets a majority).
2. Under open rule, when the government proposes its own ideal point, anything inside the lenses GG’ and GG” can be proposed on the floor, and it will defeat G.
3. Under “fire by fire” rule, the only amendments that can defeat G are inside the two lenses. If such an amendment is proposed in the shaded areas the government will let it stand; if it is in the non-shaded areas of the lenses, the government will counter propose another amendment inside the shaded part of the corresponding lens and this amendment will be the final outcome. In conclusion, a minority government of G has the ability to get outcomes inside the shaded area of the two lenses under closed rule or fire by fire rule, and (^3) In the particular case I am presenting here when G coincides with E it will be able to win all the time (the winset of G is empty). In general, this will not be the case. There will be different lenses and they will all be minimized when G is in the center of the yolk (Ferejohn etc) of the parliament (see Tsebelis (2002) for a discussion of collective vps along these lines).

inside the whole lenses under open rule. The area of the final outcome shrinks as the government moves to the center of parliament. In other words, the government has two distinct advantages: the centrality of its location inside parliament (positional advantage), and the agenda setting rules (institutional advantage). These two advantages are not simultaneously attributed to governments. The institutional advantage is pre-existing, inscribed in the institutional rules of agenda setting (the ones studied and formalized explicitly by Doering, or implied by Lijphart in their indicators). The positional advantage is generated with the coalition formation process. As a result, the positional advantage will be more worthwhile in policymaking terms the lower the level of agenda setting privileges that a government has. Governments with lots of agenda setting powers will not care very much about positional advantages, while governments with low agenda setting powers will focus on achieving positional advantages. IV. EMPIRICAL TESTS Warwick (1998) has studied the positional advantage of coalition governments, but did not condition them on agenda setting powers. Consistently with the theoretical findings in the literature he considered a two-step process: the first was the selection of a formateur, and the second the formation of the government (conditional upon the selection of a formateur). The empirical part of this paper, replicates Warwick’s positional findings, and then conditions them on the agenda setting indicators of Doering as well as Lijphart. There are two different datasets, one generated by the first two axes of a factor analysis of the manifesto project data (Budge etc), the second, generated by a left right