Recent political economic models have concluded that several structural and institutional arrangements place heavy limits on the capacity of parties to affect the conduct of macroeconomic policies according to their initial political preferences. Yet those same factors (mainly, rational expectations among economic agents, the organization of the domestic political economy, and the international business cycle) hardly constrain the choice of economic strategies designed to shape the supply side of the economy-Le., the provision of input factors, capital. and labor. Consequently, we should expect supply-side economic policies to conform to the preferred objectives of the party in government. In order to maximize growth, the Right trusts to private agents the determination of the optimal levels of savings and investment. The Left, instead, tends to rely on the public sector for that same purpose. This model is validated by looking at the levels of public intervention in fixed and human capital formation as well as tax policy in GEeD nations from 1960 to 1990.
