The Hibbs Partisan Model

The Hibbs Partisan Model
In the Nordhaus model there is policy convergence in that all governments
behave in the same opportunistic way, and all voters are assumed to have
identical preferences over inflation and unemployment. An alternative approach
is to view voters and politicians as ideological or partisan. Politicians
view winning elections as a means of putting into action their partisan programme
and heterogeneous voters will clearly have different preferences
over inflation and unemployment. Hibbs (1977) examined the post-war patterns
of economic policies and outcomes in 12 advanced capitalist democracies
for the period 1945–69 in order to test the proposition that left- and rightwing
governments have different preferences with respect to the trade-off
between inflation and unemployment. In particular, Hibbs argues that his
evidence supports the proposition that left-wing governments prefer a lower
U, higher ˙P outcome than right-wing governments. We can represent this
difference in preferences in terms of differences in loss functions. Equations
(10.8) and (10.9) show the loss (cost) functions in terms of unemployment
and inflation for two parties, a right-wing party = CR, and a left-wing party =
CL (see Alesina, 1987).
The new political macroeconom
Here UR * and P˙R* are the unemployment and inflation targets of the right
wing party and φR is the relative weight placed on deviations of inflation
from target (P˙t − P˙R* ) relative to deviations of unemployment from target
(UR – UR * ). The partisan differences can be summed up as follows.
UL UR
∗ ≤ ∗
P˙ P˙ L R
∗ ≥ ∗
φL ≤ φR
Partisan effects are further illustrated in Figure 10.5, where RR and LL indicate
the respective preferences of right- and left-wing politicians. Given the assumption
of a stable exploitable Phillips curve trade-off, left-wing governments
will choose a combination of ˙PL and UL, indicated by point L*, and right-wing
governments will choose a combination of ˙PR and UR, indicated by point R*.
Figure 10.5 The Hibbs partisan model
534 Modern macroeconomics
According to Hibbs, ‘different unemployment/inflation outcomes have important
class-linked effects on the distribution of national income’. The revealed
preference of policy makers reflects the interests of the social groups who
typically provide support for different parties. Since macroeconomic policies
have distributional consequences, Hibbs rejects Nordhaus’s assumption (N1) of
policy convergence. According to Hibbs, the empirical evidence supports the
partisan view that ‘a relatively low unemployment–high inflation macroeconomic
configuration is associated with substantial relative and absolute
improvements in the economic well-being of the poor’. Because tight labour
markets tend to generate income-equalizing effects, we should expect left-wing
governments to favour a point on the Phillips curve trade-off indicated by L*.
Right-wing parties view inflation as more damaging to their constituency of
upper middle-class voters and choose a position such as R*.
According to Hibbs, the empirical evidence supports the ideological view
of macroeconomic policy making. The differing interests of various occupational
groups is reflected in the policy preferences of left- and right-wing
political parties. In an examination of 12 Western European and North American
countries over the period 1945–69 Hibbs found strong support for the
proposition that the mean inflation rate is higher and the mean unemployment
rate lower, the greater the percentage of years that labour/socialist parties
have been in office. In addition to the static aggregated evidence, Hibbs also
found that the time series evidence for the USA and the UK supports the
proposition that Democratic and Labour administrations have usually reduced
unemployment while Republican and Conservative governments have
tended to increase unemployment. Hibbs (1987) also reports significant partisan
effects on the distribution of income and Bartels and Brady (2003)
conclude that the ‘consistent partisan differences in economic performance
identified by Hibbs remain alive and well two decades later’ and partisan
influences have had a ‘profound influence on the workings of the US economy’.
These influences are summarized in Table 10.2.
Table 10.2 Partisan influence on macroeconomic outcomes, USA, 1948–
2001
Macroeconomic outcomes Republican Democratic Partisan
presidents presidents difference
Average unemployment (%) 6.35 4.84 1.51
Average inflation (%) 3.95 3.97 –0.02
Average annual GDP growth (%) 2.86 4.08 –1.22
Source: Adapted from Bartels and Brady (2003).
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Hence there is evidence supporting the Hibbs model that systematic differences
exist in the policy choices and outcomes of partisan governments.
Hibbs argues that this is in line with the subjective preferences of the classbased
political constituencies of right- and left-wing political parties.