American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Real Effects of Markets on Politics: Evidence from US Presidential Elections
American Economic Review: Insights
vol. 6,
no. 1, March 2024
(pp. 73–88)
Abstract
Despite the economic importance of the US stock market, there is strikingly little evidence of its impact on elections. Using county-level variation in stock market participation, we document the impact of market returns on election outcomes. High-participation counties are more likely to vote for the incumbent party when the market has performed well relative to low-participation counties. Our findings provide evidence of a novel channel through which stock market fluctuations could be transmitted into the real economy.Citation
Crane, Alan D., Andrew Koch, and Leming Lin. 2024. "Real Effects of Markets on Politics: Evidence from US Presidential Elections." American Economic Review: Insights, 6 (1): 73–88. DOI: 10.1257/aeri.20220240Additional Materials
JEL Classification
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- G12 Asset Pricing; Trading Volume; Bond Interest Rates
- G35 Payout Policy
- G41 Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets [Neurofinance]
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth