Reforms and re-elections in OECD countries

Abstract

"Economic reform is sometimes seen as damaging to a government's re-election chances, but anecdotal evidence from OECD countries would not seem to strongly support this perception. This paper tests this hypothesis on a sample of 21 OECD countries over the period 1985-2003, controlling for other economic and political factors that may affect re-election. It is found that the chances of re-election for incumbent governments are not significantly affected by their record of pro-market reforms. However, the electoral impact of reform is found to differ strongly depending on which types of policies are considered. In particular, reform measures that are more likely to hurt large groups of 'insiders' seem electorally more damaging. A series of framework conditions appears to affect the impact of reforms on re-elections. Reformist governments in countries with rigid product and labour markets tend to be voted out of office, suggesting the existence of a 'rigidity trap'. While fiscal stimulus is not an effective instrument to 'sweeten the pill' and raise the odds of re-election, the presence of liberal financial markets appears to soften electoral resistance to structural reform. The latter finding is of particular relevance in the current financial crisis: forward-looking governments should not rush to over-regulate financial markets in order not to compromise the feasibility of product and labour market reforms". Copyright (c) CEPR, CES, MSH, 2010.

Fiscal consolidation and unemployment: does EPL matter?: A look at EU countries

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Uncertainty, Electoral Incentives and Political Myopia

“…Using a sample of 21 OECD countries, Buti et al . () find that high levels and growth rates of GDP have a positive impact on the chances of re‐election for incumbent governments. Wolfers () provides evidence from US gubernatorial elections that good economic performance increases the likelihood that incumbent parties stay in office.…”

Turning the page? EU fiscal consolidation in the wake of the crisis

“…Concerning the latter, the strengthening of wage bargaining power amid mass unemployment and heightened uncertainty over property rights were prominent. 11 Buti et al (2010) suggest, moreover, the electoral impact of reform to be strongly dependent on which types of policies are considered. In particular, reform measures that are more likely to hit large groups of 'insiders', such as reform of employment protection legislation or pension reform, seem electorally damaging.…”