Words speak louder than actions: The impact of politics on economic performance

In this paper, a new approach to disclose the impact of politics on economic growth is presented: we use data derived from content analysis of party manifestos as measures of party preferences. In a panel of 23 OECD countries, we detect a positive impact of party support for various market-liberal policies on economic performance. In particular, we show that parties which were more concerned with market interventions and - to a lesser extent - welfare state policies impacted on growth negatively; those which proposed incentives for business as well as technology and infrastructure had a positive impact. Moreover, the robustness of the results is demonstrated in a model averaging framework.