Does public funding of political parties affect party systems and electoral competition? Evidence from the post-communist space

The provision of state subsidies to political parties generates conflicting theoretical expectations regarding the effect of subsidies on the party system size, electoral volatility and competition. On the one hand, the availability of public funding may encourage the emergence of new parties and help new and smaller formations to compete more effectively with established parties. This can lead to a better representation of more diverse social interests and promote greater competition and a more open and democratic electoral process. On the other hand, public funding may have negative spillover effects. Access to state funding may increase the number of parties and contribute to political instability. It may also weaken the party-constituency linkages and undermine the independence of political parties due to heavy dependency on budgetary funding. Furthermore, in line with the cartel party thesis, established parties may hinder access to subsidies to the challenger parties, thus stifling electoral competition. Existing comparative research provides inconclusive evidence on the effect of state funding on party system size and dynamics. Moreover, in most cases, scholars use a single element of the public funding regime, either the availability of subsidies or the access (eligibility) threshold, which are very general proxies to account for the complexity of the public funding mechanism. This paper overcomes this limitation in assessing the impact of direct public funding on party competition by using an original dataset of state subsidies across post-communist regimes (1990-2020) that accounts for the level of public financing, eligibility threshold, allocation criteria and timing of disbursement.