The effective number of political parties (ENP) in a first-past-the-post single member (SMP) electoral system is analyzed as a dynamic process whereby the tournament nature of the election contest induces excessive entry and sunk entry costs promote persistence even as Duverger-Demsetz type political competition works to winnow unsuccessful minor candidates and parties. The result is a fringe of ever changing marginal parties circulating in long run equilibrium. The factors hypothesized to affect the entry and exit of candidates and parties are analyzed first using an auto-regressive distributed lag (ARDL) model whose advantage is that it allows the separation of an evolving long run equilibrium from short run variations in response to transitory changes in conditioning variables and the process of converging back to the long run equilibrium. The possibility that the short run adjustment process is asymmetric either for parties or candidates is tested using panel estimation techniques. The results are consistent with an observed time path that incorporates slower adjustment to positive as opposed to negative shocks. Variations in the size and trend of both the long and short run are then examined for ENP’s ability to predict changes in the competitiveness of the Canadian federal electoral system.

Additional Metadata
Keywords Expected number of political parties, entry and exit, Duverger’s Law, asymmetric adjustment, ARDL and NARDL modeling
JEL Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior (jel D72), Duration Analysis (jel C41), Truncated and Censored Models (jel C24)
Publisher Department of Economics
Series Carleton Economic Papers (CEP)
Citation
Ferris, J.S, Winer, S, & Olmstead, D.E.H. (2018). A Dynamic Model of Political Party Equilibrium: the evolution of ENP in Canada, 1870 – 2011 (No. CEP 18-04). Carleton Economic Papers (CEP). Department of Economics.