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Obama and the Macroeconomy Estimating Social Preferences Between Unemployment and Inflation

Author

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  • Soeren Enkelmann

    (Department of Economics, Leuphana University Lueneburg, Germany)

Abstract

This paper investigates social preferences towards unemployment and inflation in the United States. Estimating a popularity function with monthly data for the recent Obama administration, we find that U.S. voters react strongly to both unemployment and inflation. However, reducing unemployment is more important to society as voters would trade off 1 point of unemployment against 2.5 points of ination. One point of unemployment costs the president about 4 points, one point inflation costs him 1.5 point. Moreover, we provide evidence that macroeconomic preferences are not stable over time. Finally, we show that public preferences towards unemployment and inflation are not homogeneous across different groups in society. The poor and low-eduated, for example, react more strongly to changes in the unemployment rate than other groups.

Suggested Citation

  • Soeren Enkelmann, 2013. "Obama and the Macroeconomy Estimating Social Preferences Between Unemployment and Inflation," Working Paper Series in Economics 271, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:271
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    More about this item

    Keywords

    social preference function; popularity function; unemployment; inflation; Obama;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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