Working Paper Series
And Yet It Grows: Crisis, Ideology, and Interventionist Policy Ratchets
() and Martin Rode
Abstract: Previous studies of policy responses to economic crises
argue that crises may lead to more interventionist policy but also cause
deregulation. The empirical evidence in previous studies is equally mixed.
The present paper argues that whether or not governments implement more or
less interventions depend on their core political ideology. We thus expect
ideologically heterogeneous policy reactions to crises yet also note that
crisis responses theoretically may cause ‘policy ratchets’ where temporary
crisis policies become permanent. Employing a panel of 68 countries with
Western political institutions observed between 1975 and 2010, and
exploring the evolution of indicators of government size and regulatory
policy, we find that crises in general cause more interventionist policies
when countries have centrist or left-wing governments. We also find clear
evidence of policy ratchets in all policy areas. The ideological crisis
policies mainly relate to government consumption and market regulations.
Keywords: Economic crisis; Regulation; Government consumption; Government ideology; (follow links to similar papers)
JEL-Codes: D72; H11; H70; (follow links to similar papers)
41 pages, October 7, 2016
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