This paper provides an empirical appraisal of the influence ofpolitics on the evolution of unemployment rates in 13industrialized democracies (12 European Union countries andthe U.S.) from 1960 to 1999. We conduct new tests ofopportunistic and partisan business cycle models, using richerdata and more general specifications than previous studies. Incontrast to most previous studies, we pay particular attentionto the importance of labor market structure in conditioningthe influence of politics on unemployment. We also investigatethe relationship between political stability and economicstability.
The results suggest the existence of partisan effects, withhigher unemployment rates prevailing under ``right'' partiesthan ``left'' parties. There is more support for ``rational''partisan models that embody transient partisan impacts thanfor models with permanent effects. We find evidence that unionpower is associated with higher average unemployment rates,but that centralized bargaining institutions tend to lowerunemployment rates. The evidence also suggests that morefragmented coalition governments are associated with higherunemployment rates than single party governments.