Words Speak Louder than Actions: The Impact of Politics on Economic Performance
40 Pages Posted: 16 Jan 2011
Date Written: 2010
In this paper, a new approach to disclose the impact of politics on economic growth is presented: we use data derived from content analysis of party manifestos as measures of party preferences. In a panel of 23 OECD countries, we detect a positive impact of party support for various market-liberal policies on economic performance. In particular, we show that parties which were more concerned with market interventions and – to a lesser extent – welfare state policies impacted on growth negatively; those which proposed incentives for business as well as technology and infrastructure had a positive impact. Moreover, the robustness of the results is demonstrated in a model averaging framework.
Keywords: economic growth, political economy, ideology, panel data, model averaging
JEL Classification: O40, H11, P16
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