Political finance regimes and party system size: evidence from new and established European democracies

Studies of party system size have looked at institutional and sociological factors in their attempt to explain what determines the number of parties. While some recent studies contend that party laws, beyond the district magnitude, have a significant impact on, among others, new party entry, we know very little about whether certain rules matter more in some societies than they do in others. In this paper, we study the extent to which various party finance rules affect party system size and differentiate the effect between new and established democracies. Specifically, we focus on direct and indirect public subsidization and limits on private donation and campaign expenditure. We hypothesize that compared to established countries, new democracies tend to have a larger party system size when the political finance rules create more equal conditions for electoral competition. Using data from 43 Europe democracies, the empirical analyses support our hypothesis.