The fragility of the partisan inflation gap: Evidence from the United Kingdom

Abstract

Partisan theory predicts that left-leaning governments tolerate higher inflation, and UK data appear to confirm it. Before 1997, inflation averaged three percentage points higher under Labour than the Conservatives. I show this gap is not robust. It is the product of a single Labour government (1974–79) that coincided with the OPEC oil shocks; a randomisation test at the level of governments returns $p=0.50$, and omitting any one of nine governments can swing the gap by up to four points. With so few in the sample, the data cannot sustain the partisan effect they appear to show.