Econn-09

Description

I would like establish whether economic events affect the outcome of elections in U.S. The dependent variable for this study would be the percentage of votes garnered by incumbent. The explanatory variables would be interest rate change and unemployment rate change. In this study, the research question would be, “Do economic events affect the outcome of elections?” This particular research question is relevant since it seeks to establish the relationship between economic events and political outcomes. In this case, this study will of both academic and political interest. The outcome of this study will help to fill the knowledge gap existing in the field of political economy whereby no appropriate study linking economic events and political outcomes has been conducted in recent times (Bateman, 2011).

The target audiences for this study would be both technical and non-technical. These audiences would include political decision makers, economic policy makers and the general public. Political decision makers would be interested in understanding what affects the outcome of elections. This means that the outcome of this study will be of great help to the political decision makers since it will help them to come up with appropriate campaign manifesto in the hope of garnering more votes. For instance, if the study establishes that a decline in unemployment rate has a positive effect on the election outcome, then political decision makers would include measures to reduce unemployment in their manifesto. Comment by Author: Well put. Of course, there is the temptation to use the Nixon strategy, where he pressured the Fed chair to use an expansionary policy prior to his re-election campaign(!)

Economic policy makers would be interested in knowing whether the economic policies they formulate are appropriate for the electorate. For example, a policy to lower interest rates may be beneficial to individuals as it will create an incentive to borrow and invest. Policy makers are

appointed by the government and hence they will be interested on the outcome of this study so as formulate appropriate policies so as ensure that the incumbent remains in power (Bateman, 2011). Finally, the outcome of this study will also help to enlighten the general public on factors to consider when electing the incumbent.

Literature Review

Some researchers have employed economic methods and techniques such as statistical analysis, theoretical analysis and the econometric analysis to establish the relationship between economic events and political outcomes. Theoretical wise, economist Samuelson is credited for attempting to theoretically explain how government economic decisions affect political outcomes. Samuelson formulated the theory of optimal public expenditure in a bid to explain how government policies affect social welfare of the citizens (Ricardo, 2001). However, his study lacked relevant empirical data to justify his claim.

Akerman, another economist attempted to use statistical analysis in finding out how economic events affect political outcomes. He collected and analyzed the US data in order to find out whether the fundamental economic cycles referred to as 3 ½ -year Kitchin cycles were connected with the institutional change (Bateman, 2011). He found out that actually the 3 ½ -year Kitchin cycles represented politico-economy cycles that spanned the four years of presidential elections in the US (Bateman, 2011). The results of his findings showed that indeed changes in factors affecting investment and employment had influence on the presidential election outcome. Other researchers have attempted to employ econometric analysis to find out whether economic events affect political outcomes. For instance, Gary Smith obtained a Comment by Author: You have to be somewhat cautious with investment because the causality is more complex. Businesses tend to cut back on spending during uncertain times. If an election is hotly contested businesses may want to wait after the elections. That way they’ll have a better idea of what policies will be put into place.

regression model linking unemployment rate change and percentage of votes garnered by the incumbent by using the results of the US presidential elections for four yearly periods between 1928 and 1980 (Bateman, 2011). He used the percentage of votes garnered by the incumbent as the dependent variable and unemployment rate change as the dependent variable. The outcome of his study showed that a decline in unemployment rate positively influenced the percentage of votes garnered by the incumbent (Bateman, 2011).

Some methods and techniques that have been used in the past are not appropriate for this study. For instance, focusing on the theoretical aspects without taking into consideration the empirical evidence may lead to wrong conclusions being drawn (Creswell & Plano Clark, 2007). Some of the empirical techniques used also relied on obsolete data and therefore the results of the study may not make economic sense today. But nevertheless, the past studies provide great insights into the topic. In this study, the hypothesis to be tested would be whether interest rate change and unemployment rate change affect the outcome of presidential elections. This hypothesis can be translated into an empirical model by gathering data of the specific variables and obtaining a regression linking these variables (Baltagi, 2011).

Data

The data on various variables will be used to obtain the empirical model. This data may be obtained from the US Census Bureau website. The regression model is then estimated using this data. The regression results to be used in explaining the outcome of the study include the coefficients of estimates, t-ratios, R2, F-values, standard errors and p-values (Baltagi, 2011). A priori, I expect a negative relationship unemployment rate and the percentage of votes garnered by the incumbent. This relationship implies that an increase in unemployment rate will lead to a decline in votes garnered by the incumbent. How this is just a priori expectation and not necessarily true. Comment by Author: You may get some good results if you used state-level data. There is a sense in which “all politics is local” plus a larger data set is more likely to give you statistically significant results. Comment by Author: Where would you get election results data?

References

Baltagi, B. (2011). Econometrics. Berlin: Springer.

Bateman, B. (2011). Tocqueville's Political Economy. History Of Political Economy, 43(4), 769-