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