Partisan differences in Swedish macroeconomic policy

Abstract

The purpose of this paper is to trace partisan differences among Swedish governments during the period 1958-1998. According to the Partisan Theory of macroeconomic policy left-wing governments are relatively more concerned with the performance of the real side of the economy (real output and unemployment) as compared to rightwing governments, that place a higher weight on the nominal variables (inflation). Left-wing governments would therefore pursue more expansionary aggregate demand policy, and thereby be willing to risk a higher inflation, in order to improve real economic performance. In this paper we apply the model developed in Hibbs (1994) on Swedish data. Our empirical results support the partisan theory, showing that, ceteris paribus, aggregate demand policy under left-wing governments is relatively more expansionary than under right-wing governments, even if the expansionary policy sometimes leads to higher inflation.