Real Effects of Markets on Politics: Evidence from U.S. Presidential Elections
Alan D. Crane
American Economic Review: Insights (Forthcoming)
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.