Political Partisanship and Economic Outcomes: Canada, 1870–2020

This paper examines the role of partisanship at the provincial and federal levels in relation to the functioning of the Canadian economy. At the provincial level (1976–2019), we find no evidence of a traditional partisan effect but do find evidence weakly consistent with a rational partisan cycle a′ la Alesina. At the federal level (1870–2020), we also find no evidence consistent with a distinctive expansion in output arising when the government is controlled by the left-leaning (Liberal) political party although we again find evidence of a weak rational partisan effect. The former result is reinforced by finding the absence of evidence of partisan changes in federal spending and/or taxation. But while the data do not support a theory of left-right partisan policy over the entire post-Confederation (1867) period of Canada's history, the data do support distinctive periods of partisan influence on aggregate output. The first is consistent with Sir John A. MacDonald's post-Confederation conservative government's adoption of a policy of nation-building based on the railway, immigration, and tariffs. The second is the period between 1885 and 1933 where traditional left-right partisanship is evident and the third is the period following the Great Depression where a distinction between the outcomes arising under left- versus right-leaning parties is no longer apparent.