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The Effect of Local Economic Shocks on Local and National Elections

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Abstract

We study the reaction of voters to shifts in local economic conditions. Using the departure from the gold standard of US trading partners in 1931 and the US in 1933, we exploit heterogeneity in export destinations, creating local differences in expenditure-switching in US counties by isolating the aggregate effects of the monetary shocks using time fixed effects. We find significant changes in local voting behavior in response to both shocks, one originating abroad, and another domestically. The response to both shocks have similar magnitude. We argue that voters punished and rewarded incumbents regardless of the shocks’ origin, implying strong feedback from economic conditions to electoral outcomes.

Suggested Citation

  • Juan Herreño & Matias Morales & Mathieu Pedemonte, 2023. "The Effect of Local Economic Shocks on Local and National Elections," Working Papers 23-08, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:95894
    DOI: 10.26509/frbc-wp-202308
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    1. Erikson, Robert S., 1989. "Economic Conditions and the Presidential Vote," American Political Science Review, Cambridge University Press, vol. 83(2), pages 567-573, June.
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    3. De Benedictis-Kessner, Justin & Warshaw, Christopher, 2020. "Accountability for the Local Economy at All Levels of Government in United States Elections," American Political Science Review, Cambridge University Press, vol. 114(3), pages 660-676, August.
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    6. Bernardo Candia & Mathieu Pedemonte, 2021. "Export-Led Decay: The Trade Channel in the Gold Standard Era," Working Papers 21-11r, Federal Reserve Bank of Cleveland, revised 08 Nov 2021.
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    More about this item

    Keywords

    US Elections; Gold Standard; Economic Voting;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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