Capitalizing on Partisan Politics? The Political Economy of Sector-Specific Redistribution in Germany

Item Type Journal paper
Abstract

This paper studies the redistributive effects of government partisanship on economic sectors in a parliamentary democracy. Based on a rational partisan perspective and policy-induced campaign contribution models, we expect that once in office, ideologically different parties deliver favorable policies to different industries in order to enrich their electoral and sector-specific supporters. Using daily stock market data, we empirically evaluate whether and how the mean and the volatility of returns to four important economic sectors covaried with the electoral prospects of a right-/left-leaning coalition in Germany from 1991 to 2005. This sheds light on the magnitude of sector-specific redistribution to be expected from ideologically different governments holding office. The results show that the mean and the volatility of defense and pharmaceutical sector returns increase if a right-leaning government is becoming more likely to win the upcoming election. In contrast, an increase in the probability of a left-leaning government triggers higher returns to the alternative energy sector and increases the volatility of consumer sector returns. Thus, our estimates partly support the idea that parties redistribute across sectors.

Authors Bechtel, Michael M. & Füss, Roland
Journal or Publication Title Journal of Money, Credit and Banking
Language English
Keywords parties;elections;industrial sectors;stock market;GARCH modeling;redistribution
Subjects business studies
Institute/School SEW - Swiss Institute for Empirical Economic Research
SEPS - School of Economics and Political Science
HSG Classification contribution to scientific community
Refereed Yes
Date 22 March 2010
Publisher Wiley-Blackwell
Place of Publication Oxford UK
Volume 42
Number 2-3
Page Range 203-235
Number of Pages 33
ISSN 0022-2879
ISSN-Digital 1538-4616
Publisher DOI 10.1111/j.1538-4616.2009.00285.x
Depositing User Prof. Dr. Roland Füss
Date Deposited 05 Sep 2012 16:48
Last Modified 27 Sep 2016 15:27
URI: https://www.alexandria.unisg.ch/publications/216279

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Citation

Bechtel, Michael M. & Füss, Roland (2010) Capitalizing on Partisan Politics? The Political Economy of Sector-Specific Redistribution in Germany. Journal of Money, Credit and Banking, 42 (2-3). 203-235. ISSN 0022-2879

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https://www.alexandria.unisg.ch/id/eprint/216279
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