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Counterfiscal policies and partisan politics: evidence from industrialized countries

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  • Fredrik Carlsen

Abstract

According to partisan theories of macroeconomic policy, left-wing parties are more concerned with unemployment while right-wing parties tend to weigh the costs of inflation higher. An implication of partisan theories is that partisan policy differences should depend on the state of the economy, with left-wing governments conducting relatively more expansive policies during recessions. We test whether left-wing governments are more favourably inclined towards countercyclical fiscal policies than their right-wing counterparts using a panel data set of 18 OECD countries from 1980 to 1992. The results are supportive of partisan theories. The structural deficit is significantly higher under left-wing governments when unemployment is high or rising while the ideology of the government party (parties) has no significant impact on the structural deficit when unemployment is low or falling.

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  • Fredrik Carlsen, 1997. "Counterfiscal policies and partisan politics: evidence from industrialized countries," Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 145-151.
  • Handle: RePEc:taf:applec:v:29:y:1997:i:2:p:145-151
    DOI: 10.1080/000368497327227
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    1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
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    Cited by:

    1. Felix Rösel, 2017. "The Political Economy of Fiscal Supervision and Budget Deficits: Evidence from Germany," Fiscal Studies, Institute for Fiscal Studies, vol. 38, pages 641-666, December.
    2. Potrafke, Niklas, 2017. "Partisan politics: The empirical evidence from OECD panel studies," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 712-750.
    3. Paulo Reis Mourão, 2007. "Factores de alteração da composição da Despesa Pública: o caso norte-americano," Notas Económicas, Faculty of Economics, University of Coimbra, issue 26, pages 27-41, December.
    4. André Corrêa d’Almeida & Paulo Reis Mourão, "undated". "The Irrelevance of Political Parties’ Differences for Public Finances - Evidence from Public Deficit and Debt in Portugal (1974 – 2012) Abstract: This paper attempts to empirically test whether inter-," NIPE Working Papers 11/2015, NIPE - Universidade do Minho.
    5. Serhan Cevik & Katerina Teksoz, 2014. "Deep Roots of Fiscal Behavior," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(2), pages 5-33, November.
    6. Felix Rösel, 2014. "Co-Partisan Buddies or Partisan Bullies? Why State Supervision of Local Government Borrowing Fails," ifo Working Paper Series 189, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Reichenvater, Arno, 2007. "Business Cycles, Political Incentives and the Macroeconomy: Comparison of Models," MPRA Paper 5527, University Library of Munich, Germany.
    8. Beate Jochimsen & Robert Nuscheler, 2011. "The political economy of the German Lander deficits: weak governments meet strong finance ministers," Applied Economics, Taylor & Francis Journals, vol. 43(19), pages 2399-2415.

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