Political Cycles in OECD Economies

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Citation

Alesina, Alberto, and Nouriel Roubini. 1992. Political cycles in OECD economies. Review of Economic Studies 59(4): 663-688.

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doi:10.2307/2297992

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September 29, 2017 5:57:20 PM EDT

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http://nrs.harvard.edu/urn-3:HUL.InstRepos:4553025

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NBER RIING PAPEI SERIES

FOLTICAL CYL IN OED E1IES

Alberto Alesina Nouriel Roubini

Workir Paper No. 3478

NNrICaL JREAU OF EO)NCMIC RSEM]i

1050 Massachusetts Avenue 02138 cathridge, 0ctder 1990

We thank Jans Hamilton for generc*Isly sharirg his calpiter progran, Benjamin Friadman, Sule Ozler, Torsten Persson, Dani rick, Ja1s Stock, ilie Weil ari participants of seminars at Carneie-Mellon, Harvard, MIT, North Carolina, Trade Union Institute in Stoc)tholm, ai NR Si.mrer Institute f or very he].pfu]. ccztmtents on earlier drafts. The sugesticrts of a.ir disoussant, Assar Linbeck, ani of many other conference participants sre

extrtely valuable. Gerald en providad excellent reseaxth assistance. This paper was written while Ales u-ia was an Olin Fello., at the NBER; he gratefully acknladges financial suort frczn the Olin ar Sloan Fcunations. This paper is part of NBE2's research program in International Studies. Any cpinions expressad are those of the authors ar nct those of the National Bureau of Eoczuric Research.

NB Workir Paper #3478 Octther 1990 OLTICAL CLLS IN OEQ EOt.1c1lIS

This paper studies whether the dynamic behavior of QP growth,

unenp1oynnt ani inflation is systematically affectsi by the timlxg of elections ani of changes of gaverrments. The saiile ixludes the last three decades in 18 OEC) econcinies. We explicitly test the irplication of several

nxxiels of political cycles, both of the "cpporthnistic" ard of the "partisan"

type. Also, we confront the inplication of recent "rati" ncdels with nore traditional approaches. (Xr results can be sunmiarizud as follows: a) The "political Lusiness cycle" hypothesis, as fornfl.atud in Nordhaus (1975)

on caitplt arxl unemploynnt is generally rej ectad by the data. With the

exception of Japan, we also reject by the extension of the "political

Lusiness cycle" nel, with eniceis trmin of elections; b) inflation terxs to nxrease i.nm1iately after elections, perhaps as a result of preelectoral expansionary nonetary ani fiscal policies; (c) we fire evidence of tatporazy partisan differences in c'utpft ani unp1oynont ani of lcn—run partisan differences in the inflation rate as inpliud by the "rational partisan theoxy" by Alesina (1987); (d) we fini virtually no evidei of permanent partisan differences in cutp1t arxl unip1oynont. Alberto Alesina

Nouriel Roubini

Harvard University Cairbridge, ) 02138

Box 1972 - Yale Station

Ipartnnt of Econcmdcs

NBER ard CEPR

Departnnt of Enics Yale University

New Haven, cr 06520-1972

N ani cE

I. Introduction Different models of political cycles emphasize either the "opportunistic"

or the "partisan" incentives of policymakers. In "opportunistic" models, the policymakers maximize their popularity or their probability of reelection. In "partisan" models different political parties represent the interests of different constituencies and, when in office, fo