Do Parties Matter for Economic Outcomes? A Regression-Discontinuity Approach

Per Pettersson-Lidbom ()

Journal of the European Economic Association, 2008, vol. 6, issue 5, 1037-1056

Abstract: A long-standing issue in political economics is to what extent party control makes a difference in determining fiscal and economics policies. This question is very difficult to answer empirically because parties are not randomly selected to govern political entities. This article uses a regression-discontinuity design, namely, party control changes discontinuously at 50% of the vote share, which can produce "near" experimental causal estimates of the effect of party control on economic outcomes. The method is applied to a large panel data set from Swedish local governments with a number of attractive features. The results show that there is an economically significant party effect: Left-wing governments spend and tax 2-3% more than right-wing governments. Left-wing governments also have 7% lower unemployment rates, which is partly due to that left-wing governments employ 4% more workers than right-wing governments. (JEL: C21, D72, D78, H71, H72) (c) 2008 by the European Economic Association.

JEL-codes: C21 D72 D78 H71 H72 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (254)

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