Working Paper: NBER ID: w2706
Authors: Alberto Alesina; Howard Rosenthal
Abstract: The post-war United States exhibits two rather strong politico-economic regularities. The political regularity is that the party of the President has always lost votes in aid-term Congressional elections, relative to its Congressional vote in the previous elections; the economic regularity is that Republican administrations exhibit below average economic growth in the first half of each term and Democratic administrations are associated with above average growth in their first half. In the second halves economic growth is similar under the two administrations. We provide a rational expectations model which can explain these two regularities. In Presidential elections voters have to choose between two polarized candidates; mid-term elections are used to counterbalance the President's policies by strengthening the opposition in Congress. Since presidents of different parties are associated with different economic policies, our model predicts a (spurious) correlation between the state of the economy and elections. The predictions of our model are in sharp contrast with those of traditional retrospective voting models in which voters simply reward the incumbent if the economy is doing well immediately before the election. Our empirical results suggest that our model performs at least as well and often better than alternative models. In addition, we question previous claias that voters are short sighted and naively backward looking.
Keywords: Partisan cycles; Congressional elections; Macroeconomy; Political economy
JEL Codes: D72; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political party affiliation (K16) | economic performance (P17) |
| Republican administrations (E65) | below-average economic growth (O57) |
| Democratic administrations (P16) | above-average economic growth (O57) |
| voters' expectations about future economic policies (D72) | voting behavior (D72) |
| cyclical pattern of votes (D72) | party in power loses votes in midterm elections (D72) |
| polarized policy preferences (D72) | voter behavior (K16) |
| economic conditions (E66) | voter behavior (K16) |
| past economic performance (P17) | electoral outcomes (K16) |
| rational expectations (D84) | strategic voting behavior (D72) |
| strategic voting behavior (D72) | mitigate perceived negative economic outcomes (F69) |