In a new published paper, "Words speak louder than actions: The impact of politics on economic performance" (Journal of Comparative Economics, August 2012) Steffen Osterloh writes:
In this paper, a new approach to disclose the impact of politics on economic growth is presented: data derived from content analysis of party manifestos is used as measures of party preferences. In a panel of 23 OECD countries, a positive impact of party support for various market-liberal policies on economic performance can be detected. In particular, I show that parties which were more concerned with market interventions and – to a lesser extent – welfare state policies impacted on growth negatively; those which proposed incentives for business as well as technology and infrastructure had a positive impact. Moreover, the robustness of the results is demonstrated in a model averaging framework.Osterloh concludes:
First, although we found that party preferences for certain policy areas turn out to have a significant impact on economic performance, we could not detect an impact of party ideology based on the party family approach. Hence, growth-stimulating economic policy does not depend on the question whether a left-wing or right-wing party is in office. It rather depends on the actual programmatic profile of the party, although it cannot be denied that the identified growth- enhancing policies can be broadly categorized as economic liberal policies. Second, we analysed the effect on short-term economic performance and not on long-term economic growth, which would require a completely different research design. Thus, positive effects of certain policies only accruing in the long-term perspective, which for instance can be expected of investments in education, cannot be captured by our analysis.A draft of the Osterloh's paper (November 2012) is here.