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Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections

Author

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  • Riaño, Juan Felipe
  • Trebbi, Francesco

Abstract

Between 2021 and 2024, the United States experienced one of the most severe inflation episodes in decades, coinciding with renewed debate over the role of economic conditions for electoral outcomes. This paper studies the political economy of inflation and real wages using U.S. county-level data on family budget costs, nominal income, and electoral results for President and Congress during this period. Exploiting within-state, cross-county variation in changes in local prices over time, it examines how inflation, real wage growth, and purchasing power relate to changes in vote shares of incumbents, vote margins, and turnout. Real wage decline, rather than higher inflation, is predictive of Republican electoral gains, in line with an economic voting rationale. Inflation, however, retains an association with presidential vote shares beyond pure economic voting.

Suggested Citation

  • Riaño, Juan Felipe & Trebbi, Francesco, 2026. "Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections," CEPR Discussion Papers 21563, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21563
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    Keywords

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    JEL classification:

    • P0 - Political Economy and Comparative Economic Systems - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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