Capitalizing on partisan politics? The political economy of sector-specific redistribution in Germany

This paper studies the redistributive effects of government partisanship on economic sectors in a parliamentary democracy. Based on a rational partisan perspective and policy-induced campaign contribution models, we expect that once in office, ideologically different parties deliver favorable policies to different industries in order to enrich their electoral and sector-specific supporters. Using daily stock market data, we empirically evaluate whether and how the mean and the volatility of returns to four important economic sectors covaried with the electoral prospects of a right-/left-leaning coalition in Germany from 1991 to 2005.