TY  - JOUR
AU  - Snowberg,Erik
AU  - Wolfers,Justin
AU  - Zitzewitz,Eric
TI  - Party Influence in Congress and the Economy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12751
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12751
L1  - http://www.nber.org/papers/w12751.pdf
N1  - Author contact info:
Erik Snowberg
Division of Humanities and Social Sciences
MC 228-77
California Institute of Technology
Pasadena, CA 91125
Tel: 626/395-4094
E-Mail: snowberg@caltech.edu

Justin Wolfers
Business and Public Policy Department
Wharton School, University of Pennsylvania
3620 Locust Walk
Room 1456 Steinberg-Deitrich Hall
Philadelphia, PA 19104-6372
Tel: (215) 898-3013
Fax: (215) 898-7635
E-Mail: jwolfers@wharton.upenn.edu

Eric Zitzewitz
Department of Economics
Dartmouth College
6106 Rockefeller Hall
Hanover, NH 03755
Tel: 603/646-2891
Fax: 603/646-2122
E-Mail: eric.zitzewitz@dartmouth.edu
AB  - To understand the extent to which partisan majorities in Congress influence economic policy, we compare financial market responses in recent midterm elections to Presidential elections.  We use prediction markets tracking election outcomes as a means of precisely timing and calibrating the arrival of news, allowing substantially more precise estimates than a traditional event study methodology.  We find that equity values, oil prices, and Treasury yields are slightly higher with Republican majorities in Congress, and that a switch in the majority party in a chamber of Congress has an impact that is only 10-30 percent of that of the Presidency.  We also find evidence inconsistent with the popular view that divided government is better for equities, finding instead that equity valuations increase monotonically, albeit slightly, with the degree of Republican control.
ER  -