The policy impact of unified government: evidence from 2000 to 2002

Do the outcomes of government action differ between periods of unified and divided government? Using “event study” methodology, this articles addresses the question by looking at sudden shifts between divided and unified government—Bush v. Gore, the Jeffords switch, and the 2002 election. The results show that oil and gas stocks (i.e. Republican “constituent firms”) rose abruptly as Republicans took unified control, while renewable energy stocks (i.e. Democratic “constituent firms”) fell. The pattern reversed, however, when Democrats took back control of the Senate. These outcomes call into question non-partisan theories of law making.