Political cycles and economic performance in OECD countries: Empirical evidence from 1951-2006

This paper examines whether electoral motives and government ideology influence short-term economic performance. I employ data on annual GDP growth in 21 OECD countries over the 1951-2006 period and provide a battery of empirical tests. In countries with two-party systems GDP growth is boosted before elections and, under leftwing governments, in the first two years of a legislative period. These findings indicate that political cycles are more prevalent in two-party systems because voters can clearly punish or reward political parties for governmental performance. My findings imply that we need more elaborate theories of how government ideology and electoral motives influence short-term economic performance.