Are State Elections Affected by the National Economy? Evidence from Australia
AbstractUsing data from 191 Australian state elections, we test how voters respond to economic conditions. We find that unemployment has a strong impact on election outcomes, with each additional percentage point of unemployment reducing the incumbent’s re-election probability by 3-5 per cent. However, when we separate luck (unemployment in other states) from competence (unemployment in that state relative to the rest of Australia), we find that both luck and competence are equally important. This is consistent with a psychological theory of the ‘fundamental attribution error’, in which observers consistently underestimate the importance of situational constraints. We also find evidence that unemployment driven by a clearly exogenous source – the United States economy – has a non-trivial impact on the re-election probability of Australian state governments. Our results suggest that Australian voters either retain too many state governments in economic booms, vote out too many state governments in recessions, or perhaps both.
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Bibliographic InfoPaper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 593.
Date of creation: Jan 2009
Date of revision:
rational voting; political business cycles; unemployment; elections;
Other versions of this item:
- Andrew Leigh & Mark Mcleish, 2009. "Are State Elections Affected by the National Economy? Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 85(269), pages 210-222, 06.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-13 (All new papers)
- NEP-CDM-2009-04-13 (Collective Decision-Making)
- NEP-LAB-2009-04-13 (Labour Economics)
- NEP-POL-2009-04-13 (Positive Political Economics)
- NEP-SOC-2009-04-13 (Social Norms & Social Capital)
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- Sambit Bhattacharyya & Jeffrey G. Williamson, 2009.
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