Economists’ Political Donations and GDP Forecast Accuracy

We examine the association between economists’ political donations and the accuracy of Gross Domestic Product (GDP) forecasts. Prior research suggests that individual political donations reflect personal political orientations, leading to a partisan bias. Therefore, economists might not objectively interpret information, with a subsequent reduction in GDP forecast accuracy. Using a sample of one-quarter-ahead US GDP growth forecasts for 2003–2020, we find that economists making political donations are more accurate than their peers. This result suggests that despite the potential partisan bias, individual political donations give economists an information advantage in predicting GDP growth. We also document that the informational benefits associated with donations are stronger when the political party financed by economists controls both the Senate and House of Representatives. However, these benefits are reduced in periods of uncertainty and when the economists’ forecasting houses are more politically active.