RATIONAL PARTISAN THEORY - EMPIRICAL-EVIDENCE FOR THE UNITED-STATES

This paper presents two tests of the rational partisan theory (RPT) of business cycles. First, I develop and test an RPT model in which wage contracts are staggered and overlapping. Bureau of Labor Statistics ( BLS) data on the density and duration of wage contracts and estimates of the incumbent parry's election-win probability are employed to cali brate partisan intervention variables entered in output growth regress ions. Next, I perform a more ''flexible'' lest of the RPT by comparing partisan output growth differences after elections in which the outco me was relatively surprising with partisan output growth differences a fter elections in which the outcome was widely anticipated. The two ap proaches produce the same conclusion: The RPT is not supported by the data.