Government Partisanship, Labor Organization, and Macroeconomic Performance: A Corrigendum

Abstract

Alvarez, Garrett and Lange (1991) used cross-national panel data on the Organization for Economic Coordination and Development nations to show that countries with left governments and encompassing labor movements enjoyed superior economic performance. Here we show that the standard errors reported in that article are incorrect. Reestimation of the model using ordinary least squares and robust standard errors upholds the major finding of Alvarez, Garrett and Lange, regarding the political and institutional causes of economic growth but leaves the findings for unemployment and inflation open to question. We show that the model used by Alvarez, Garrett and Lange, feasible generalized least squares, cannot produce standard errors when the number of countries analyzed exceeds the length of the time period under analysis. Also, we argue that ordinary least squares with robust standard errors is superior to feasible generalized least squares for typical cross-national panel studies.