ELECTORAL ANDPARTISANCYCLES INECONOMICPOLICIES ANDOUTCOMES

Abstract

Key Words political business cycles, electioneering, partisan theory, political economy s Abstract Policy makers in democracies have strong partisan and electoral incentives regarding the amount, nature, and timing of economic-policy activity. Given these incentives, many observers expected government control of effective economic policies to induce clear economic-outcome cycles that track the electoral calendar in timing and incumbent partisanship in character. Empirics, however, typically revealed stronger evidence of partisan than of electoral shifts in real economic performance and stronger and more persistent electoral and partisan shifts in certain fiscal, monetary, and other policies than in real outcomes. Later political-economic general-equilibrium approaches incorporated rational expectations into citizens' and policy makers' economic and political behavior to explain much of this empirical pattern, yet critical anomalies and insufficiencies remain. Moreover, until recently, both rational-and adaptiveexpectations electoral-and-partisan-cycle work underemphasized crucial variation in the contexts-international and domestic, political and economic, institutional, structural, and strategic-in which elected partisan incumbents make policy. This contextual variation conditions policy-maker incentives and abilities to manipulate economic policy for electoral and partisan gain, as well as the effectiveness of such manipulation, differently across democracies, elections, and policies. Although relatively new, research into such context-conditional electoral and partisan cycles seems to offer much promise for resolving anomalies and an ideal substantive venue for theoretical and empirical advancement in the study of political economy and comparative democratic politics more generally.

Electoral Confidence and Political Budget Cycles in Non-OECD Countries

“…This means that even if pre-election polls exist, incumbents might be unable to access the information that would allow them to gauge their re-election prospects. 12 Note that we do not make any assumption about expectation formation of voters, which has been a matter of ongoing discussion in political science and economics (Franzese, 2002;Krause, 1997). 13 Correlation between both data sources is still high, generally in the area of 0.70 and above.…”

“…In view of these mixed findings, PBC research has increasingly turned to exploring the conditions under which incumbents engage in fiscal manipulation (Alt & Rose, 2009;Franzese, 2002;Hibbs, 2006). Most of this research has focused on incumbents' abilities to manipulate public spending.…”

“…Most of this research has focused on incumbents' abilities to manipulate public spending. Persson and Tabellini (2003) and Franzese (2002) have highlighted institutional features of political systems that facilitate or hamper fiscal manipulation. 7 Others have suggested that democratization reduces this ability, pointing to democratic stability (Adi Brender & Drazen, 2007;A.…”

Policy by Contract: electoral cycles, parties and social pacts, 1974–2000

“…Based on the simple premise that office-seeking politicians have every incentive to manipulate fiscal and/or monetary policy to improve their electoral chances, a series of theoretical arguments emerged, each more complex than the last in an effort to explain the persistent lack of empirical support for the simpler arguments. Suffice to say the empirical literature has 2 identified an (weak) electoral cycle in policies, but none for economic outcomes; partisan cycles in which Left parties inflate and spend more than Right parties in an effort to achieve full employment have proven even more elusive (Franzese, 2002a).…”

“…Based on the simple premise that office-seeking politicians have every incentive to manipulate fiscal and/or monetary policy to improve their electoral chances, a series of theoretical arguments emerged, each more complex than the last in an effort to explain the persistent lack of empirical support for the simpler arguments. Suffice to say the empirical literature has 2 identified an (weak) electoral cycle in policies, but none for economic outcomes; partisan cycles in which Left parties inflate and spend more than Right parties in an effort to achieve full employment have proven even more elusive (Franzese, 2002a).I follow Clark (2003) in arguing that without specifying the mechanisms through which partisan politicians can influence policy and voter expectations it will be impossible to link these two literatures. But rather than concentrate on the Mundell-Fleming conditions 1 , my approach is to focus on parties' abilities to work with peak associations of economic actors to implement policy, particularly relating to wage/price bargaining.…”