Divided Government and Economic Performance: The Taiwan Experiences, 1992-2006
The Democratic Progressive Party won the 2000 presidential election in Taiwan and acquired the ruling power over the central government, while the Kuomintang still controlled maintained a majority in the Legislative Yuan. When there is divided government, since different political parties control the executive and legislative branches, the operation of party government is weakened, as the two political institutions are in conflict with each other. This certainly makes responsible and efficient government an unattainable goal. However, the question concerning the consequence of divided government—does the national economy have poorer performance under divided government?—remains contentious. This study examines the differences in macroeconomic performance between the 1992-2000 unified government and the 2000-2006 divided government by estimating the impacts of the political and economic determinants on Taiwan’s gross national product (GNP). The findings indicate that the variables of the government system, government expenditures, and interest rates have significant effects on Taiwan’s GNP. The evidence confirms the assumption that distinct forms of government can influence the efficiency of governance, i.e., divided government tends to result in policy gridlock and political stalemate between the executive and legislative branches and consequently this is likely to negatively affect macroeconomic performance, and vice versa. In concluding, the key findings are reviewed, the limitations of this study are outlined and suggestions are provided for future research.