ELECTORAL AND PARTISAN CYCLES IN ECONOMIC POLICIES AND OUTCOMES

▪ 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 adaptive-expectations electoral-and-partisan-cycle work underemphasized crucial variation...

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