Are State Elections Affected by the National Economy? Evidence from Australia

Andrew Leigh and Mark McLeish

No 593, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: Using data from 191 Australian state elections, we test how voters respond to economic conditions. We find that unemployment has a strong impact on election outcomes, with each additional percentage point of unemployment reducing the incumbent’s re-election probability by 3-5 per cent. However, when we separate luck (unemployment in other states) from competence (unemployment in that state relative to the rest of Australia), we find that both luck and competence are equally important. This is consistent with a psychological theory of the ‘fundamental attribution error’, in which observers consistently underestimate the importance of situational constraints. We also find evidence that unemployment driven by a clearly exogenous source – the United States economy – has a non-trivial impact on the re-election probability of Australian state governments. Our results suggest that Australian voters either retain too many state governments in economic booms, vote out too many state governments in recessions, or perhaps both.

Keywords: rational voting; political business cycles; unemployment; elections (search for similar items in EconPapers)
JEL-codes: D72 D80 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-cdm, nep-lab, nep-pol and nep-soc
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Citations: View citations in EconPapers (10)

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Journal Article: Are State Elections Affected by the National Economy? Evidence from Australia (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:auu:dpaper:593

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