Politics and Unemployment in Industrialized Democracies

22 Pages Posted: 2 Nov 2005

See all articles by Linda G. Veiga

Linda G. Veiga

University of Minho - Economic Policies Research Unit (NIPE)

Henry W. Chappell

University of South Carolina - Darla Moore School of Business

Abstract

This paper provides an empirical appraisal of the influence of politics on the evolution of unemployment rates in 13 industrialized democracies (12 European Union countries and the U.S.) from 1960 to 1999. We conduct new tests of opportunistic and partisan business cycle models, using richer data and more general specifications than previous studies. In contrast to most previous studies, we pay particular attention to the importance of labor market structure in conditioning the influence of politics on unemployment. We also investigate the relationship between political stability and economic stability.

The results suggest the existence of partisan effects, with higher unemployment rates prevailing under right parties than left parties. There is more support for rational partisan models that embody transient partisan impacts than for models with permanent effects. We find evidence that union power is associated with higher average unemployment rates, but that centralized bargaining institutions tend to lower unemployment rates. The evidence also suggests that more fragmented coalition governments are associated with higher unemployment rates than single party governments.

Keywords: Unemployment, Ideology, Parties, Politics, Elections, Unions

Suggested Citation

Veiga, Linda G. and Chappell, Henry W., Politics and Unemployment in Industrialized Democracies. Public Choice, Vol. 110, No. 3/4, pp. 261-282, 2002 , Available at SSRN: https://ssrn.com/abstract=829904

Linda G. Veiga (Contact Author)

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, P-4710-057
Portugal
+351-253604568 (Phone)
+351-253601380 (Fax)

HOME PAGE: http://https://www.eeg.uminho.pt/pt/_layouts/15/UMinho.PortaisUOEI.UI/Pages/userinfo.aspx?p=1814

Henry W. Chappell

University of South Carolina - Darla Moore School of Business ( email )

Francis M. Hipp Building
Department of Economics
Columbia, SC 29208
United States
803-777-4940 (Phone)
803-777-6876 (Fax)

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