Government Formation and Endogenous Parties

This paper provides a formal theory of government for a political system characterized by a proportional representation electoral system, a parliamentary government that exercises collective responsibility, and a government formation process. Political parties are assumed to be policy-oriented and serve the interests of those who vote for them. Parties choose policy platforms which determine their representation in parliament, and given that representation, the parties bargain over the government to be formed and the policies that government will implement. Equilibria have the property that parties choose dispersed policy positions. The theory thus provides predictions of party locations such as those developed in the manifesto project.