© 2002 Kluwer Academic Publishers. Printed in the Netherlands. 261 Politics and unemployment in industrialized democracies ∗

Abstract. This paper provides an empirical appraisal of the influence of politics on the evol-ution of unemployment rates in 13 industrialized democracies (12 European Union countries and the U.S.) from 1960 to 1999. We conduct new tests of opportunistic and partisan business cycle models, using richer data and more general specifications than previous studies. In con-trast to most previous studies, we pay particular attention to the importance of labor market structure in conditioning the influence of politics on unemployment. We also investigate the relationship between political stability and economic stability. The results suggest the existence of partisan effects, with higher unemployment rates pre-vailing under “right ” parties than “left ” parties. There is more support for “rational ” partisan models that embody transient partisan impacts than for models with permanent effects. We find evidence that union power is associated with higher average unemployment rates, but that centralized bargaining institutions tend to lower unemployment rates. The evidence also sug-gests that more fragmented coalition governments are associated with higher unemployment rates than single party governments. 1