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Does political uncertainty influence firm owners‘ business perceptions?

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  • Marina Riem

Abstract

Using microdata that serve as the foundation of the ifo Business Climate Index, Germany’s leading business cycle indicator, I examine whether political uncertainty influences how firm owners perceive their present state and future development of business. I use state election months as indicators of times of high political uncertainty. The results show that firm owners are optimistic regarding their expected business development before state elections. After state elections firms change their expectations and expect their business to develop worse. It is conceivable that firm owners are more optimistic prior to state elections because politicians promised individual policies to gratify the firms’ needs during election times. Firms might be disappointed after elections as the promises made during election campaigns by politicians turn out to be empty words.

Suggested Citation

  • Marina Riem, 2016. "Does political uncertainty influence firm owners‘ business perceptions?," ifo Working Paper Series 226, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_226
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    References listed on IDEAS

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    Cited by:

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    2. Kauder, Björn & Potrafke, Niklas & Reischmann, Markus, 2016. "Do politicians reward core supporters? Evidence from a discretionary grant program," European Journal of Political Economy, Elsevier, vol. 45(C), pages 39-56.
    3. Ruth Maria Schüler, 2016. "Educational inputs and economic development in end-of-nineteenth-century Prussia," ifo Working Paper Series 227, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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