Words Speak Louder than Actions: The Impact of Politics on Economic Performance

40 Pages Posted: 16 Jan 2011

See all articles by Steffen Osterloh

Steffen Osterloh

Center for European Economic Research (ZEW)

Date Written: 2010

Abstract

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

Suggested Citation

Osterloh, Steffen, Words Speak Louder than Actions: The Impact of Politics on Economic Performance (2010). ZEW - Centre for European Economic Research Discussion Paper No. 10-092, Available at SSRN: https://ssrn.com/abstract=1739743 or http://dx.doi.org/10.2139/ssrn.1739743

Steffen Osterloh (Contact Author)

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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