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 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.