Abstract
We argue that two key party system characteristics - the effective number of parties and electoral volatility - have a curvilinear, inverted-U shaped, influence on public goods provision. Rejecting the linear pattern generally assumed in the literature, we contend that optimal governance outcomes will be observed at intermediate levels of party system size and stability. Only under these conditions will the benefits of competition be balanced against the risks of fragmentation. We find support for our arguments by employing new data and estimating panel models of public goods provision in 29 Indian states and territories. We hope that our findings will contribute to understanding how party systems function, particularly those at the subnational level, and will better inform how they can be leveraged for development and good governance. We also hope that they will provide some guidance about the future trajectory of public policy in the Indian states.