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Political Party & Unemployment

Political Party & Unemployment. Econ 240A Professor Llad Phillips. Group 5: Richard Baker, Michael Jelmini, Kenneth Morino, Cambria Price, You Ren, James Young. Why? Upcoming graduation Recent recession Recent increase in unemployment What?

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Political Party & Unemployment

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  1. Political Party & Unemployment Econ 240A Professor Llad Phillips Group 5: Richard Baker, Michael Jelmini, Kenneth Morino, Cambria Price, You Ren, James Young

  2. Why? Upcoming graduation Recent recession Recent increase in unemployment What? Is there a correlation between unemployment and presidential party affiliation? How? Time series data of national unemployment rate Bernoulli distribution of party affiliation Objective

  3. H0 : When a republican is in presidential office, the unemployment rate is higher than when a democrat is in office. Ha : There is no correlation between the political affiliation of the president and the unemployment rate. Hypothesis

  4. Unemployment Data from 1947-2002 -Bureau of Labor Statistics http://stats.bls.gov Presidential Party Affiliations -The White House http://www.whitehouse.gov/history/presidents Collected Data

  5. Meet the Presidents

  6. Presidential Party Affiliation

  7. Time Series Data of Unemployment Rates

  8. Linear Probability Model

  9. Regression Results

  10. Problem: LPM not constrained within 0<P(x)<1 Solution: model with Probit! Linear Probability Model Analysis

  11. Model with Probit

  12. Probit Regression Results

  13. Is there an unemployment rate overlap due to previous presidential party affiliation? If so, how much overlap? 1 year 2 years Will these models produce a better/worse correlation? Further Analysis

  14. One Year Forward Lag Before After

  15. Probit Model of One Year Lag

  16. One Year Lag Results

  17. Two Year Forward Lag Before After

  18. Probit Model of Two Year Lag

  19. Two Year Lag Results

  20. A significant correlation between unemployment rate and political party affiliation was discovered A stronger correlation was found when applying a one year lag, and to a lesser degree, a two year lag, on this relationship Overall, we conclude from our data that unemployment is significantly greater when a Republican president is in office when compared to a Democrat Conclusions

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