Political parties and the supply side of the economy: The provision of physical and human capital in advanced economies, 1960-90

Theory: Partisan tenure of government (in contrast to institutionalist and structural approaches) is used to explain the nature of governmental strategies to affect the supply side of the economy-the provision of the input factors, capital and labor. Hypotheses: Supply-side economic strategies are a function of the party in office. Left-wing governments spend heavily in physical and human capital formation to raise the productivity of factors and the competitiveness of the economy. Right-wing governments rely instead on private agents to maximize economic growth. The organization of the domestic political economy and the international economy, which place heavy limits on the capacity of parties to affect the conduct of macroeconomic policies, hardly constrain the choice of supply-side economic strategies. Methods: Regression analysis of data for levels of public spending on gross fixed capital formation and on education in OECD nations from 1960 to 1990. Results: Supply-side policies conform to partisan preferences throughout the period examined. The institutional configuration of the economy affected policies jointly with government partisanship until the oil shock but not afterwards. Economic openness does not constrain the choice of supply-side policies.