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Competitiveness, consumer confidence and election outcomes

Velibor Mačkić (), Petar Sorić and Ivana Lolić
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Velibor Mačkić: Faculty of Economics and Business, University of Zagreb

No 1704, EFZG Working Papers Series from Faculty of Economics and Business, University of Zagreb

Abstract: The literature on the political business cycle (PBC) suggests that politicians systematically manipulate economic conditions in order to increase their chances of re-election. The list of variables that have been found to have a significant effect on the probability of re-election includes macroeconomic (inflation rate, unemployment rate, output growth rate) and fiscal (budget balance, level of expenditures and tax revenues) outcomes. This paper focuses on the question whether price and non-price competitiveness indicators together with consumer confidence index have a statistically significant effect. Thus, this paper addresses two empirical questions. First, in light of the globalisation process and on-going comparisons among national economies, could price and non-price indicators serve as a proxy for voters when deciding on whether to penalise or reward the incumbent? And second, based on the economic theory of voting, is consumer confidence index a better indicator of re-election probability compared to unemployment and output growth rates? Using a dataset of EU member states over the 2000-2015 period and by applying probit/logit analysis we test both questions.

Keywords: political business cycles; competitiveness; consumer confidence index; EU (search for similar items in EconPapers)
JEL-codes: D72 H50 P16 (search for similar items in EconPapers)
Pages: 12
Date: 2017-05-16
New Economics Papers: this item is included in nep-pol
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