We examine state income and government spending data to investigate the role of political parties and elections in state business cycles of the United States, and find strong support for the partisan political business cycles, both traditional and rational versions. The growth rate of per capita real income and government spending tend to be higher (lower) with a Democratic (Republican) governor as well as a Democratic (Republican) president. In case of economic growth, we find some evidence for opportunistic cycles induced by national level politics; meanwhile, both national and state governments seem to generate expansionary policy in election years.
- Political business cycle
- State level
ASJC Scopus subject areas
- Business and International Management
- Economics, Econometrics and Finance(all)