When do parties care for what the voters want?

While a substantial literature argues that public policies in advanced democracies are shaped by electoral competition, there is disagreement about at least two issues. First: Do policy-makers respond directly to public opinion or is the position of the opposition decisive? And second: Under what conditions do policy-makers respond (either to public opinion or the position of the opposition)? The paper argues that we need to consider both sides of the political market to get a full picture of the impact of electoral competition on public policies. On the demand side, it needs to be a real possibility for the government to lose the next election and thus be relegated to the opposition. On the supply side, the opposition needs to suggest an alternative policy that is popular among the voters and the opposition needs to be credible in the issue area in question - otherwise, voters have nowhere to turn to even if they dislike government policy. Moreover, the relevant issue will need to be salient if an impact of public opinion is to be expected. Thus, a government's leeway to reform increases if an issue is not high on the public agenda, if the opposition does not offer an alternative or if that alternative is not popular or credible with the voters. I illustrate these propositions by comparing case studies from three different issue areas in Germany (minimum wage, nuclear energy and rescue of the Euro).