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Briefing
Partisan Conflict in the U.S. and Potential Impacts on the Economy
Partisan conflict is not new, either in American politics or elsewhere. For economists, politics per se is not of central interest, but its implications for economic activity are. The more specific step we take in this article is to relay how partisan legislative disagreement has evolved and how that may affect the economy. Of particular interest are the effects on how businesses delay hiring and investment when facing high policy uncertainty. We will focus on fiscal policy since it, unlike monetary policy, must be negotiated in legislative settings. We will also concentrate attention here on ...
Working Paper
Partisanship and Fiscal Policy in Economic Unions: Evidence from U.S. States
In economic unions the fiscal authority consists not of one, but many governments. We analyze whether partisanship of state-level politicians affects federal policies, such as fiscal stimulus in the U.S. Using data from close elections, we find partisan differences in the marginal propensity to spend federal transfers: Republican governors spend less. This partisan difference has tended to increase with measures of polarization. We quantify the aggregate effects in a New Keynesian model of Republican and Democratic states in a monetary union: Lowering partisan differences to levels ...
Working Paper
The Changing Polarization of Party Ideologies: The Role of Sorting
U.S. congressional roll-call voting records show that as polarization of the two parties along the economic dimension changes, polarization along the social/cultural dimension tends to change in the opposite direction. A model of party competition within a two-dimensional ideology space is developed in which party platforms are determined by voters who compose the party. It is shown that if distribution of voter preferences is radially symmetric, polarization of party ideologies along the two dimensions are inversely related, as observed. The model gives a remarkably good quantitative account ...