Obama and the Macroeconomy Estimating Social Preferences Between Unemployment and Inflation

Soeren Enkelmann (enkelmann@leuphana.de)
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Soeren Enkelmann: Department of Economics, Leuphana University Lueneburg, Germany

No 271, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

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.

Keywords: social preference function; popularity function; unemployment; inflation; Obama (search for similar items in EconPapers)
JEL-codes: D72 H11 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2013-05
New Economics Papers: this item is included in nep-mac
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