Rational Partisan Theory: Evidence for Seven OECD Economies

According to the Rational Partisan Theory of business cycles (“RPT”), ex ante uncertainty about the outcome of elections will generate post‐election output growth fluctuations. This paper employs vote prediction equations and opinion polls to compute election win probability estimates for 62 elections in seven OECD economies. The probability estimates are used to calibrate partisan intervention terms entered in output growth regressions. For the UK and, to some extent, Canada and Australia, our results are supportive of the RPT. For the US, the calibrated intervention terms are dominated by a partisan dummy variable turned on after each election.