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Are State Elections Affected by the National Economy? Evidence from Australia *
Author(s) -
LEIGH ANDREW,
MCLEISH MARK
Publication year - 2009
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2009.00549.x
Subject(s) - luck , unemployment , economics , boom , recession , causal chain , attribution , state (computer science) , situational ethics , competence (human resources) , demographic economics , labour economics , macroeconomics , political science , psychology , social psychology , law , philosophy , theology , management , epistemology , algorithm , environmental engineering , computer science , engineering
Using data from 191 Australian state elections, we test how voters respond to economic conditions. We find that unemployment has a strong impact on election outcomes, with each additional percentage point of unemployment reducing the incumbent's re‐election probability by 3–5 per cent. However, when we separate luck (unemployment in other states) from competence (unemployment in that state relative to the rest of Australia), we find that both luck and competence are equally important. This is consistent with a psychological theory of the ‘fundamental attribution error’, in which observers consistently underestimate the importance of situational constraints. We also find evidence that unemployment driven by a clearly exogenous source – the US economy – has a non‐trivial impact on the re‐election probability of Australian state governments. Our results suggest that Australian voters either retain too many state governments in economic booms, vote out too many state governments in recessions, or perhaps both.