NCPA - National Center for Policy Analysis

Which Economic Conditions Affect Presidential Elections?

September 18, 2003

Economists have conducted numerous statistical studies regarding the impact of economic conditions on presidential elections, says economist Alan Reynolds.

Surprisingly, given the amount of attention paid to it, they have found that neither the level of unemployment nor the degree of income inequality has a significant effect on election outcomes.

What economic factors affect the outcome of a presidential election?

  • Economic Growth. Yale University econometrician Ray Fair found that the number of quarters before the election in which economic growth exceeds 2.9 percent is significant, and according to his model adds about a percentage point to President Bush's share of the vote.
  • Stock Market Performance. One study by Richard Gleisner, and another by Stephen Hayes and Joe Stone, also found election results depend in part on the performance of the stock market -- which has risen by about a trillion dollars this year.
  • Douglas Hibbs found that most presidential results can be explained by growth of real, after-income per person -- which depends on economic growth, but also on low inflation and low taxes. It increased 5.1 percent from the end of 2001 to the second quarter of this year, before the midyear tax cut.

The only time rising after-tax income failed to predict the winner in presidential races, according to Hibbs, were during unpopular wars in 1952 and 1968. As for economic growth, it has already exceeded 2.9 percent three times in the past two years and will again in the current quarter. And the election is still four quarters away.

Source: Alan Reynolds, "Election Economics," September 11, 2003,


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