Do Parties Matter for Economic Outcomes? A Regression-Discontinuity Approach
AbstractA long-standing issue in political economics is to what extent party control makes a difference in determining fiscal and economics policies. This question is very difficult to answer empirically because parties are not randomly selected to govern political entities. This article uses a regression-discontinuity design, namely, party control changes discontinuously at 50% of the vote share, which can produce "near" experimental causal estimates of the effect of party control on economic outcomes. The method is applied to a large panel data set from Swedish local governments with a number of attractive features. The results show that there is an economically significant party effect: Left-wing governments spend and tax 2-3% more than right-wing governments. Left-wing governments also have 7% lower unemployment rates, which is partly due to that left-wing governments employ 4% more workers than right-wing governments. (JEL: C21, D72, D78, H71, H72) (c) 2008 by the European Economic Association.
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Bibliographic InfoArticle provided by MIT Press in its journal Journal of the European Economic Association.
Volume (Year): 6 (2008)
Issue (Month): 5 (09)
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Web page: http://www.mitpressjournals.org/jeea
Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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