Partisan Differences in the Distributional Effects of Economic Growth: Stock Market Performance, Unemployment, and Political Control of the Presidency

<div><p></p><p>This article examines the differences in the distributional effects of economic growth. While all incumbents are incentivized to create economic growth in order to win reelection, they use a diverse variety of policies to achieve this growth. These policy choices are often congruent with the demands of the core constituent groups of the respective parties. This suggests that economic growth is not equally shared by all, but that some groups are more or less benefited from the sets of policies chosen by the incumbent parties to stimulate growth. We test this proposition by investigating the effects of economic growth on stock market performance and unemployment. Our results show that economic growth under Republican presidents has a stronger effect on stimulating stock market performance, while economic growth under Democratic presidents has a stronger effect on reducing unemployment. Overall, these results highlight the partisan differences in macroeconomic policy and illustrate one of the causal mechanisms behind the substantial and rising economic inequality in the USA.</p>