European Journal zyxwvuts of Political Research zyxwvu 29: zyxwvut 87-104 (January zyxw 1996) zyxw 0 1996 Kluwer Academic Publishers. Printed in the Netherlands. zyxw Constitutional structures and regime performance in 18 industrialized democracies: A test of Olson’s hypothesis MARKUS M. L. CREPAZ University of Georgia, USA Abstract. According to Olson’s concept of encompassing organizations, strong two-party, plu- rality oriented political systems should create more ‘responsible’ public policies than ‘weak’ multi-party governments based zyxwvu on proportional representation. zyxw An empirical measure of ‘en- compassment’, termed popular cabinet support, is developed and tested in a multivariate con- trolled statistical analysis of 18 industrialized democracies. While Olson’s theoretical concept of encompassing organizations appears to hold, his empirical operationalization, namely, strong two-party systems based on plurality electoral rules, does not. The findings reveal that the alternative measures of ‘encompassment’, popular cabinet support, significantly reduces the rate of unemployment and inflation, indicating that the wider the popular support base of govern- ment, the more responsibly these governments behave. Introduction In the literature on comparative regime performance there are two theoreti- cal strands which lead to contradictory conclusions on the relative impact of different institutional structures on public policy. Mancur Olson (1982, 1986a, b) and others argue that winner-take-all two-party systems (‘Westminster style’), produce more ‘responsible’ outcomes since centralized two party systems are more ‘encompassing’ than multi-party systems. The rationale behind Olson’s argument is that the more encompassing parties become, the more their interest and the ‘general interest’ converge, and thus, the more dysfunctional it becomes to ‘unload’ the externalities of one party’s action onto members of another party. Thus, as a result of their wider ‘en- compassment’ these institutional systems have the capacity to ‘internalize the externalities’ of their collective action. Therefore, they tend to behave more responsibly by minimizing redistributive policies favouring particular groups, and supporting policies which are more likely to approximate the ‘general interest’.’ In direct opposition to Olson’s concept is the rationale of Lijphart (1993), Powell (1982), Baylis (1989), and others. They stress the advantages of multi- party coalitions, of a consensual, inclusive, and accommodative decision- making as opposed to the competitive, exclusionary institutional structure of the majoritarian or Westminster type. The advantages of consensual political structures are that policies are more carefully deliberated, more perspectives are weighed and taken into consideration and a larger number of options