general economic conditions and national elections the fact that economic conditions influence voters is a leading commonplace of conversation in election years the question is is this fact in fact a fact despite the overwhelming popularity of the fact it has received neither an explicit theoretical analysis presumably because it is so obvious that economic adversity should create political adversaries nor until recently a satisfactory statistical analysis gerald h kramer has presented a multivariate analysis of congressional elections which would strongly suggest that fluctuations in the rate of unemployment have no appreciable effect upon elections but that fluctuations in per capita real income are influential in the following pages i propose to 1 reaffirm his finding on the electoral unimportance of ordinary fluctuations in unemployment 2 argue that contrary to kramer fluctuations in real income also do not have important electoral effects and 3 present an argument based upon rational voter behavior for the unimportance of general economic conditions in national elections

voters as fiscal conservatives voters penalize federal and state spending growth this is the central result of my analysis of voting behavior in presidential senatorial and gubernatorial elections from 1950 1988 the composition of federal spending growth seems irrelevant the vote loss to the president s party from an extra dollar of defense or nondefense spending is the same however in gubernatorial elections expansion of state welfare spending exacts a disproportionate political price deficit financing of federal or state spending does not appear to matter politically i conclude by discussing the obvious question of why government budgets have grown in the face of this voter hostility

the impact of the demographic transition on capital formation the population of the united states is aging we review a variety of the implications this has for u s national saving rates and discuss the policy issues that they raise after reviewing what different models would predict for household saving over the next several decades we consider how the demographic transition may also affect national saving through changes in government behavior ways in which the composition of household saving might change as individuals age are also analyzed along with the implications of changes in government fiscal policy for asset composition excerpt

bread and peace voting in u s presidential elections a simple bread and peace model shows that aggregate votes forpresident in postwar elections were determined entirely byweighted average growth of real disposable personal income percapita during the incumbent party s term and the cumulativenumbers of american military personnel killed in action as aresult of u s intervention in the korean and vietnamese civilwars the model is subjected to robustness tests against twenty two variations in functional form inspired by the extensiveliterature on presidential voting not one of these variationsadds value to the bread and peace model or significantly perturbsits coefficients

rising longevity education savings and growth this paper examines the impact of declines in adult mortality on growth in an overlapping generations model with public education and imperfect annuity markets a decline in mortality affects growth through three channels first it raises the saving rate and thereby increases the rate of physical capital accumulation second it reduces accidental bequests lowers investment and thereby lowers the rate of physical capital accumulation third it may lead the median voter to increase the tax rate for public education initially but lower the tax rate in a later stage starting from a high mortality rate as found in many third world populations the net effect of a decline in mortality is to raise the growth rate however starting from a low mortality rate such as is found in most industrial populations the net effect of a further decline in mortality is to reduce the growth rate the findings appear consistent with recent empirical evidence

public saving and policy coordination in aging economies in the coming decades the share of people of working age will fall significantly in most developed countries according to optimal taxation theory public debts should be reduced before the baby boom generation retires i find that if debts are instead maintained at current levels welfare may be reduced substantially in countries with a large public sector and or a large demographic change since population aging will be less dramatic in the united states than in europe and japan capital will move from europe and japan to the united states these capital movements will facilitate the us demographic transition but aggravate the transition in most european countries

mortality decline and long run economic growth this paper examines the impacts of mortality decline on long run growth in a dynastic family two sector growth model with social security a rise in longevity has direct effects on fertility human capital investment and growth as well as indirect effects through increasing unfunded social security contributions both the direct and indirect effects depend on the relative strength of the tastes for the number and welfare of children and may have different signs the net effects of rising longevity on fertility tend to be negative but positive on human capital investment and growth c 2001 elsevier science s a all rights reserved

the 1992 1994 and 1996 elections a comment and a forecast a model of the two way relationship between elections and the economy previously estimated on historical data for 1916 1988 is applied to the united states elections of 1992 1994 and 1996 the 1992 result was a surprise to the model since the economy had performed reasonably well that election year the midterm elections of 1994 were accurately forecast the republicans took control of congress not because of unusual circumstances but because of a normal midterm cycle president clinton s chances in 1996 look dim given the current modest growth rate and an electoral bias favoring republican presidential candidates but an alternative model keyed more to the voters choosing clinton to balance the republican congress gives him a reasonable chance of reelection

trends random walks and tests of the permanent income hypothesis abstract recent studies find that consumption is excessively sensitive to income these studies assume that income is stationary around a deterministic trend the data however do not reject the hypothesis that disposable personal income is a random walk with drift if income is indeed a random walk then the standard testing procedure is greatly biased toward finding excess sensitivity moreover if income follows either a more general non stationary process or a borderline stationary process this procedure is also seriously biased

simple tests of distributional effects on macroeconomic equations the presence of distributional effects in macroeconomic equations is shown to coincide with nonlinearity in micro behavioral relationships parameters estimated with aggregate data as in representative agent models contain distributional biases that are not measurable using aggregate data alone tests for distributional effects and other measures of the extent of aggregation problems are derived using distributional data observed over time significant distributional effects are noted for a model of annual aggregate u s commodity expenditure data a static model that accommodates individual heterogeneity is found to be statistically equivalent to a simply dynamic model that accommodates first order autocorrelation

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

peasants or bankers the american electorate and the u s economy t he usual model of electoral reaction to economic conditions assumes the retrospective economic voter who bases expectations solely on recent economic performance or personal economic experience voter as peasant a second model assumes a sophisticated economic voter who incorporates new information about the future into personal economic expectations voter as banker using the components both retrospective and prospective of the index of consumer sentiment ics as intervening variables between economic conditions and approval we find that the prospective component fully accounts for the presidential approval time series with aggregate consumer expectations about long term business conditions in the approval equation neither the usual economic indicators not the other ics components matter moreover short term changes in consumer expectations respond more to current forecasts than to the current economy the qualitative result is a rational expectations outcome the electorate anticipates the economic future and rewards or punishes the president for economic events before they happen economics moves political behavior with hard times administrations lose support with good times they gain it we know this to be true but when we ask how by what processes the political translation of economic experience occurs the an

econometrics and presidential elections this paper discusses an econometric equation that explains votes for president as a function of economic events and incumbency information the history of the equation is reviewed the update after the 1992 election is discussed and a prediction for the 1996 election is made conditional on an economic forecast

income distribution in the united states political action has affected postwar income distribution in the united states mainly through policy induced variations in macroeconomic activity and government transfer benefits in proportion to total income we present a small dynamic model of the connections among the partisan balance of power macroeconomic fluctuations transfer spending trends and income distribution outcomes the model is based on the premise that the parties have different distributional goals and it is designed to identify how shifts in party control of the presidency and the strength of the parties in congress have affected the distribution of after tax after transfer income by influencing cyclical economic performance and the flow of resources to transfer programs we therefore extend the partisan theory of macroeconomic policy to the domain of income distribution outcomes

post cartel pricing during litigation standard methods in the u s for calculating antitrust damages in price fixing cases are shown to create a strategic incentive for firms to price above the non collusive price after the cartel has been dissolved this results in an overestimate of the but for price and an underestimate of the level of damages the extent of this upward bias in the but for price is greater the longer the cartel was in place and the more concentrated the industry

endogenous fiscal policy and capital market transmissions in the presence of demographic shocks abstract previous analyses of population aging mainly focused on the social security implications of the aging trend this paper addresses aging in an open economy framework with two regions that have politically responsive fiscal policy regarding education finance demographic shocks start an economic growth process but results are sensitive to a critical parameter in the model that indicates return to education spending low values of this parameter are associated with less favorable economic outcomes hence a policy implication emerges that enhancing the education system might pay off in terms of easing the negative growth and welfare consequences of expected demographic shocks

the welfare state turnout and the economy a comparative analysis while the economic voting literature is voluminous comparatively little attention has been paid to the question of how or whether the economy affects turnout i address this issue by examining national elections in 29 countries using time series data the initial findings are replicated by a case study of american presidential and midterm elections since 1896 it is argued that the effect of economic adversity depends upon the degree of welfare state development this relationship is argued to be nonlinear so that mobilization occurs at either extreme while withdrawal obtains in the middle range the importance to democratic theory the study of elections and the politics of welfare policy are discussed

the portfolio composition of asset holdings in the united kingdom an extensive literature has developed on theoretical aspects of portfolio selection one basic model which often serves as a convenient benchmark assumes that individuals choose their portfolio to maximise expected utility in a world of perfect information perfect capital markets and no taxes or transaction costs if these individuals exhibit constant relative risk aversion the optimal asset combination will be one in which the proportion of wealth invested in each type of asset is independent of total wealth the asset proportions are also independent of age if the analysis is extended to a lifecycle framework with an additively separable intertemporal utility function once the stringent preconditions of this benchmark model are relaxed it becomes progressively more difficult to derive any firm predictions regarding the structure of asset portfolios the recognition of such factors as transaction costs indivisibilities capital market imperfections and the vagaries of tax systems as well as the possibility that relative risk aversion may not be constant makes it unlikely that asset proportions will show stability across wealth and age groups but portfolio theory is generally ambiguous about how the pattern of asset holdings is affected 2 it follows that the further analysis of portfolio behaviour needs to be primarily empirically orientated unfortunately data on the asset holdings of individuals or households are notoriously poor in comparison with other important economic variables information is available from sample surveys but there are usually problems with the limited asset coverage suspect valuations and biases arising from the non randomness of response rates furthermore the sample sizes are generally low against these deficiencies has to be set the fact that the surveys contain a range of other economic variables and demographic characteristics whose relationship with asset holdings can be investigated projector and weiss i966 report asset shares for a sample of 2 557 households in the united states and these data have been subsequently used by feldstein i976 to examine the impact of the tax structures on asset holdings using another source uhler and cragg i97i present results on portfolio composition for 965 households focusing in particular on the holdings of money balances exploiting yet

the ecological fallacy revisited aggregate versus individual level findings on economics and elections and sociotropic voting several aggregate level studies have found a relationship between macroeconomic conditions and election outcomes operating in intuitively plausible directions more recent survey based studies however have been unable to detect any comparable relationship operating at the individual voter level this persistent discrepancy is puzzling one recently proposed explanation for it is that voters actually behave in an altruistic or sociotropic fashion responding to economic events only as they affect the general welfare rather than in terms of self interested pocketbook considerations it is argued here that the discrepancies between the macro and micro level studies are a statistical artifact arising from the fact that observable changes in individual welfare actually consist of two unobservable components a government induced and politically relevant component and an exogenous component caused by life cycle and other politically irrelevant factors it is shown that because of this individual level cross sectional estimates of the effects of welfare changes on voting are badly biased and are essentially unrelated to the true values of the behavioral parameters of interest they will generally be considerable underestimates and may even be of the wrong sign an aggregate level time series analysis on the other hand will often yield reasonably good if somewhat attenuated estimates of the underlying individual level effects of interest thus in this case individual behavior is best investigated with aggregate rather than individual level data it is also shown that the evidence for sociotropic voting is artifactual in the sense that the various findings and evidence which ostensibly show sociotropic behavior are all perfectly compatible with the null hypothesis of self interested pocketbook voting