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Are State Elections Affected by the National Economy? Evidence from Australia

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  • ANDREW LEIGH
  • MARK MCLEISH

Abstract

Using 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 US 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. Copyright © 2009 The Economic Society of Australia.

Suggested Citation

  • 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, June.
  • Handle: RePEc:bla:ecorec:v:85:y:2009:i:269:p:210-222
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    References listed on IDEAS

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    1. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
    2. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
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    Cited by:

    1. Andrew Leigh, 2009. "Does the World Economy Swing National Elections?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(2), pages 163-181, April.
    2. Rosa C. Hayes & Masami Imai & Cameron A. Shelton, 2015. "Attribution Error In Economic Voting: Evidence From Trade Shocks," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 258-275, January.
    3. Amy King & Andrew Leigh, 2009. "Beautiful Politicians," Kyklos, Wiley Blackwell, vol. 62(4), pages 579-593, November.
    4. Sambit Bhattacharyya & Jeffrey G. Williamson, 2011. "Commodity Price Shocks And The Australian Economy Since Federation," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 51(2), pages 150-177, July.
    5. Gebhard Kirchgässner, 2016. "Voting and Popularity," CESifo Working Paper Series 6182, CESifo Group Munich.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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