Working Paper: NBER ID: w19826
Authors: Scott R. Baker; Nicholas Bloom; Brandice Canes-Wrone; Steven J. Davis; Jonathan A. Rodden
Abstract: There appears to be a strong upward drift in policy-related economic uncertainty after 1960. We consider two classes of explanations for this rise. The first stresses growth in government spending, taxes, and regulation. A second stresses increased political polarization and its implications for the policy-making process and policy choices. While the evidence is inconclusive, it suggests that both factors play a role in driving the secular increase in policy uncertainty over the last half century.
Keywords: policy uncertainty; government spending; political polarization
JEL Codes: D72; E62; H11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased government spending (H59) | increased policy uncertainty (D89) |
| complexity of federal regulations (L51) | increased policy uncertainty (D89) |
| political polarization (D72) | increased policy uncertainty (D89) |
| government activity (H10) | increased policy uncertainty (D89) |
| political polarization (D72) | extreme policies (E65) |
| extreme policies (E65) | increased policy uncertainty (D89) |
| diverging economic policy positions (F68) | increased policy uncertainty (D89) |