The Democrat-Republican presidential growth gap and the partisan balance of the state governments

It is known that the US economy has grown faster during Democrat presidencies, but the Democrat-Republican presidential GDP growth gap cannot be attributed fully to policy differences, nor did Democrat presidents happen to benefit systematically from more favorable external shocks. The question why thus remains open. We postulate that, if the effect is real, a Democratic Party performance advantage should be present with respect to measures of political control other than just the presidency. We investigate partisan control of US state governments and show that national GDP grew faster when more states had Democrat governors and Democrat-majority state legislatures: a one-standard-deviation increase in the share of governorships controlled by the Democratic Party (unified Democrat state governments) is associated with a 0.57-percentage-point (0.77-percentage-point) increase in the real US national GDP growth rate. The effect appears to occur on top of the presidential D-R growth gap, suggesting that the Democrat growth advantage may be a more generalized phenomenon. To investigate whether the effects are explained by state-level policy differences, we adopt an encompassing measure of a state’s policy priorities—state policy liberalism (in the modern, popular sense rather than the classical sense). Nevertheless, our findings are not explained by state policy liberalism. That result echoes the puzzle at the national level that key national policy differences cannot account for the presidential growth gap.