How Does Cabinet Instability Affect Political Performance? Portfolio Volatility and Health Care Cost Containment in Parliamentary Democracies

Abstract

This article explores the relationship between cabinet instability and political performance in parliamentary democracies. I develop two theoretical arguments about how cabinet instability should affect government effectiveness, and I use these to define several measures of instability. The first argument suggests that instability in the partisan composition of cabinets should make it difficult for governments to adopt and implement new policy programs. The second argument suggests that instability in the partisan control of portfolios within the government (portfolio volatility) should make it difficult for cabinet ministers to obtain relevant information during policy formulation and implementation. I test both arguments by examining the short- and long-run effect of the instability variables on success at health care cost containment. The analysis indicates that short-run increases in portfolio volatility present problems for government decision makers, but in the long run, unstable systems are able to address the problem that instability poses.