The role of political partisanship during economic crises
Major economic crises may promote structural reforms, by increasing the cost of the status quo, or hinder them, by inducing more demand for protection. The ideology and political partisanship of the ruling government may be crucial in determining the prevailing course of action. In good times, conservative parties are typically pro-reform. However, do these parties try to exploit periods of crisis to carry out their reforms? Do social-democratic parties support even greater social protection? To answer these questions, this paper uses indicators of structural reforms in the labor, product, and financial markets for 25 OECD countries over the 1975–2008 period. The empirical analysis confirms the ambiguous effect of crises: product markets are liberalized, but financial markets become more regulated. Partisan politics also matters, as right parties are associated with more pro-market reforms. Yet, crises modify partisan politics: right-wing parties refrain from promoting privatizations, and oppose the introduction of greater financial market regulations. By contrast, center parties liberalize and trim unemployment benefits generosity, while left parties privatize. Furthermore, weak, fractionalized governments, which are associated with more regulated product markets, are also more likely to liberalize during a crisis. Copyright Springer Science+Business Media, LLC 2014
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 158 (2014)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/public+finance/journal/11127/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Abdul Abiad & Enrica Detragiache & Thierry Tressel, 2010. "A New Database of Financial Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 281-302, June.
- Alberto Alesina & Allan Drazen, 1989.
"Why are Stabilizations Delayed?,"
NBER Working Papers
3053, National Bureau of Economic Research, Inc.
- William Tompson & Thai-Thanh Dang, 2010. "Advancing Structural Reforms in OECD Countries: Lessons from Twenty Case Studies," OECD Economics Department Working Papers 757, OECD Publishing.
- Cukierman, Alex & Tommasi, Mariano, 1998.
"When Does It Take a Nixon to Go to China?,"
American Economic Review,
American Economic Association, vol. 88(1), pages 180-97, March.
- Cukierman, A. & Tommasi, M., 1997. "When does it take a Nixon to go to China?," Discussion Paper 1997-91, Tilburg University, Center for Economic Research.
- Mariano Tommasi, 1995. "Why Does it Take a Nixon to go to China?," UCLA Economics Working Papers 728, UCLA Department of Economics.
- Cukierman, A. & Tommasi, M., 1997. "When Does It Take a Nixon to Go to China," Papers 30-97, Tel Aviv.
- Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
- Paola Profeta, 2002. "Retirement and Social Security in a Probabilistic Voting Model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 331-348, August.
- Roberto Perotti, 1999. "Fiscal Policy in Good Times and Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1399-1436.
- Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006.
"Who adjusts and when? On the political economy of reforms,"
Harvard Institute of Economic Research Working Papers
2108, Harvard - Institute of Economic Research.
- Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who Adjusts and When? On the Political Economy of Reforms," NBER Working Papers 12049, National Bureau of Economic Research, Inc.
- Ashoka Mody & Abdul d Abiad, 2003.
"Financial Reform; What Shakes it? What Shapes it?,"
IMF Working Papers
03/70, International Monetary Fund.
- Enrica Detragiache & Abdul d Abiad & Thierry Tressel, 2008. "A New Database of Financial Reforms," IMF Working Papers 08/266, International Monetary Fund.
- David Stromberg, 2008. "How the Electoral College Influences Campaigns and Policy: The Probability of Being Florida," American Economic Review, American Economic Association, vol. 98(3), pages 769-807, June.
- Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
- Giuseppe Nicoletti & Andrea Bassanini & Ekkehard Ernst & Sébastien Jean & Paulo Santiago & Paul Swaim, 2001. "Product and Labour Markets Interactions in OECD Countries," OECD Economics Department Working Papers 312, OECD Publishing.
- Casey B Mulligan, 1999.
"Gerontocracy, Retirement, and Social Security,"
University of Chicago - George G. Stigler Center for Study of Economy and State
154, Chicago - Center for Study of Economy and State.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Gerontocracy, Retirement, and Social Security," NBER Working Papers 7117, National Bureau of Economic Research, Inc.
- Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Gerontocracy, retirement, and social security," Economics Working Papers 383, Department of Economics and Business, Universitat Pompeu Fabra.
- Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
- Roger Congleton, 2012. "On the political economy and limits of crisis insurance: the case of the 2008–11 bailouts," Public Choice, Springer, vol. 150(3), pages 399-423, March.
- Allan Drazen & William Easterly, 2001. "Do Crises Induce Reform? Simple Empirical Tests of Conventional Wisdom," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 129-157, 07.
- Raul Labán & Federico Sturzenegger, 1994. "Distributional Conflict, Financial Adaptation And Delayed Stabilizations," Economics and Politics, Wiley Blackwell, vol. 6(3), pages 257-276, November.
- Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
- Per Pettersson-Lidbom, 2008. "Do Parties Matter for Economic Outcomes? A Regression-Discontinuity Approach," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1037-1056, 09.
- Roger Congleton, 2009. "On the political economy of the financial crisis and bailout of 2008–2009," Public Choice, Springer, vol. 140(3), pages 287-317, September.
- Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who Adjusts and When?The Political Economy of Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 53(si), pages 1.
When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:158:y:2014:i:1:p:143-165. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.