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  5. Real Effects of Markets on Politics: Evidence from U.S. Presidential Elections

Real Effects of Markets on Politics: Evidence from U.S. Presidential Elections

  • Alan D. Crane
  • Andrew Koch
  • Leming Lin
American Economic Review: Insights (Forthcoming)

Abstract

Despite the economic importance of the U.S. stock market, there is strikingly little evidence of its impact on elections. Using countylevel 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.

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