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The fragility of the partisan inflation gap: Evidence from the United Kingdom

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  • Algarhi, Amr Saber

Abstract

Partisan theory predicts that left-leaning governments tolerate higher inflation, and UK data appear to confirm it. Before 1997, inflation averaged three percentage points higher under Labour than the Conservatives. I show this gap is not robust. It is the product of a single Labour government (1974–79) that coincided with the OPEC oil shocks; a randomisation test at the level of governments returns p=0.50, and omitting any one of nine governments can swing the gap by up to four points. With so few in the sample, the data cannot sustain the partisan effect they appear to show.

Suggested Citation

  • Algarhi, Amr Saber, 2026. "The fragility of the partisan inflation gap: Evidence from the United Kingdom," Economics Letters, Elsevier, vol. 267(C).
    • Handle: RePEc:eee:ecolet:v:267:y:2026:i:c:s0165176526003022
    DOI: 10.1016/j.econlet.2026.113106
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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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