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Politics and macroeconomic performance in the OECD countries

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  • Cusack, Thomas R.
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    Abstract

    This paper provides an overview of the major macroeconomic problems that have confronted the OECD countries during the last four decades. It also explores some leading arguments regarding the political bases of these problems. An extensive account of the experiences of these countries in terms of five major macroeconomic problem areas, growth, employment, price stability, external balances, and equality, is provided. The relative performance of these countries is given particular emphasis. An attempt is made to place their economic progress and difficulties into a broader historical perspective and to provide some background with respect to related developments. This is followed by a discussion of three of the leading arguments regarding the political basis of economic performance (social consensus, class-based partisan politics, and government failure). An evaluation of the empirical validity of these arguments is provided. None of the three arguments (and their variants) garnered evidence that was uniformly supportive. Aside from somemodest support for the coherence version of the class-based partisan politics model, the effects of political factors on growth appear to be nil. The existence of tradeoffs between left and right preferences in terms of other macroeconomic outcomes, specifically with respect to unemployment and inflation, seem not to manifest themselves in the presence of social consensus. Both the desired outcome of full employment and price stability can be achieved under conditions of social consensus. Interestingly, such consensus will do nothing to advance the goal of income equalization. Partisan politics does seem to matter in most of the economic problem areas examined. There is some evidence that a strong left and labor will bring about lower unemployment and greater equality at the cost of higher inflation and a poorer performance on the external account. -- Vorliegende Studie bietet einen Überblick über die wichtigsten makroökonomischen Probleme, mit defnen sich die OECD-Länder in den letzten vierzig Jahren konfrontiert sahen. Dabei werden auch Argumente in Betracht gezogen, die politische Gründe für das Auftreten der Probleme verantwortlich machen. Eine ausführliche Darstellung über die Erfahrungen der Länder in den fünf makroökonomischen Problembereichen Wachstum, Beschäftigung, Preisstabilität, Außenbilanzen und Gleichheit wird geliefert. Besondere Aufmerksamkeit kommt dabei der relativen Performanz dieser Länder zu. Der Autor versucht, sowohl den wirtschaftlichen Fortschritt als auch die Probleme in diesem Bereich in einen breiteren historischen Kontext einzuordnen, um damit die Hintergründe für damit einhergehende Entwicklungen zu verdeutlichen. Im Anschluß daran werden die drei wesentlichen Konzepte, die den Zusammenhang zwischen politischen Rahmenbedingungen und wirtschaftlicher Performanz zu erklären suchen (,social consensus, ,class-based partisan politics und ,government failure), diskutiert. Diese Modelle werden dann auf ihre empirische Gültigkeit hin überprüft. Keiner der drei Ansätze (oder Varianten davon) können durch Daten eindeutig belegt werden. Abgesehen von einem schwachen Beleg für die Kohärenz-Version des ,class-based partisan politics Modells, scheinen die Auswirkungen politischer Faktoren auf das Wirtschaftswachstum nicht relevant zu sein. Das Vorhandensein von ,tradeoffs zwischen linken und rechten Prioritäten in Bezug auf andere makroökonomische outcomes, insbesondere in Verbindung mit Arbeitslosigkeit und Inflation, scheinen sich unter den Bedingungen des ,social consensus-Modells nicht zu manifestieren. Sowohl das gewünschte Ergebnis der Vollbeschäftigung als auch Preisstabilität können unter den Bedingungen des ,social consensus Modells erreicht werden. Interessanterweise trägt dieser Konsensus nicht dazu bei, eine Angleichung der Einkommen zu schaffen. ,Partisan politics hingegen scheint in den meisten untersuchten ökonomischen Problemfeldern eine Rolle zu spielen. Es hat sich gezeigt, daß häufig eine starke Linke in Kombination mit einer starken Arbeiterbewegung niedrigere Arbeitslosigkeit und mehr Gleichheit schafft, auf Kosten von höheren Inflationsraten und verschlechterter außenwirtschaftlicher Performanz.

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    Bibliographic Info

    Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economic Change and Employment with number FS I 95-315.

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    Date of creation: 1995
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    Handle: RePEc:zbw:wzbece:fsi95315

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    1. David Romer, 1991. "Openness and Inflation: Theory and Evidence," NBER Working Papers 3936, National Bureau of Economic Research, Inc.
    2. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, December.
    3. Summers, Lawrence H & Gruber, Jonathan & Vergara, Rodrigo, 1993. "Taxation and the Structure of Labor Markets: The Case of Corporatism," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 385-411, May.
    4. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
    5. McCallum, John, 1986. "Unemployment in OECD Countries in the 1980s," Economic Journal, Royal Economic Society, vol. 96(384), pages 942-60, December.
    6. Levitt, M S, 1976. "The Redistributive Effects of Taxation in the Report of the Royal Commission on the Distribution of Income and Wealth," Economic Journal, Royal Economic Society, vol. 86(343), pages 579-88, September.
    7. Dowrick, Steve, 1989. "Sectoral change, catching up and slowing down : OECD post-war economic growth revisited," Economics Letters, Elsevier, vol. 31(4), pages 331-335, December.
    8. Pryor, Frederic L., 1988. "Corporatism as an economic system: A review essay," Journal of Comparative Economics, Elsevier, vol. 12(3), pages 317-344, September.
    9. McCallum, John, 1983. "Inflation and Social Consensus in the Seventies," Economic Journal, Royal Economic Society, vol. 93(372), pages 784-805, December.
    10. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 327-68, May.
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