Great Expectations: Electoral Accountability After Economic Shocks

This paper examines how exogenous economic shocks shape electoral accountability in local elections. We develop a theoretical framework in which a sudden increase in household income temporarily boosts support for incumbents, even when the shock is unrelated to their actions. As voters gradually update their expectations, however, the incumbent’s advantage fades. We test the model’s predictions using Brazil’s 2003 legalization of genetically engineered soybean seeds, a policy that triggered uneven productivity gains across municipalities due to variation in climate and soil. Leveraging this quasi-natural experiment over the 2000–2020 period, we show that incumbent mayors were more likely to be reelected in municipalities with larger gains in soy productivity --- but this advantage was short-lived. Our findings highlight how misattribution and voter learning jointly shape the political consequences of economic change in developing countries, where structural reliance on commodity exports increases vulnerability to external shocks.