Electoral Incentives, Political Business Cycles and Macroeconomic Performance: Empirical Evidence from Post-War US Personal Income Growth
a1 Department of Political Science, University of South Carolina
Conventional wisdom suggests that macroeconomic outcomes do not follow a political business cycle (PBC) pattern. In this study, the nature of the electoral underpinnings of such opportunistic behaviour are investigated by analysing alternative formulations of PBC theory: (1) a naïve-unconditional PBC, (2) an electoral security-conditional PBC, (3) an electoral uncertainty-conditional PBC; and (4) a partisan-conditional PBC. Data on the US real personal income growth rate for the 1948:1–2000:4 quarterly period reveals support for both naïve-unconditional and partisan-conditional PBCs, yet rejects an electoral cycle attributable to the incumbent administration's ex
ante re-election prospects. Simulation analysis reveals that while Democratic administrations enjoy higher income growth than Republican counterparts for non pre-election stimulus periods, Republican presidents are associated with larger pre-election economic expansions than Democratic presidents consistent with a partisan-conditional PBC theoretical model. This finding supports the notion that incumbent governments engage in partisan-based policy balancing with respect to the creation of opportunistic electoral cycles in real macroeconomic activity. On a broader level, these statistical findings provide strong support for adaptive models of the electoral cycle that emphasize partisan differences while refuting the policy neutrality proposition and rational-competence models predicated on the extent to which an incumbent administration experiences electoral vulnerability.
a An earlier version of this article was presented at the Annual Meeting of the American Political Science Association, Boston, Mass., 2002. The author thanks Larry Bartels, Fredrik Carlsen, Henry Chappell, William Keech, B. Peter Rosendorf, David Sanders and the Journal's anonymous reviewers for helpful suggestions and constructive criticisms on earlier versions. Any errors or omissions that remain are solely the author's own.