Partisan impacts on the economy: evidence from prediction markets and close elections
- Creators
- Snowberg, Erik
- Wolfers, Justin
- Zitzewitz, Eric
Abstract
Analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections. We sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day. Analyzing high frequency financial fluctuations following the release of flawed exit poll data on election day 2004, and then during the vote count we find that markets anticipated higher equity prices, interest rates and oil prices, and a stronger dollar under a George W. Bush presidency than under John Kerry. A similar Republican–Democrat differential was also observed for the 2000 Bush–Gore contest. Prediction market based analyses of all presidential elections since 1880 also reveal a similar pattern of partisan impacts, suggesting that electing a Republican president raises equity valuations by 2–3 percent, and that since Ronald Reagan, Republican presidents have tended to raise bond yields.
Additional Information
© 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. The authors thank Gerard Daffy, John Delaney, Paul Rhode, and Koleman Strumpf for data, and Meredith Beechey, Jon Bendor, Ray Fair, Ray Fisman, Ed Glaeser, Ben Jones, Tom Kalinke, Brian Knight, Andrew Leigh, Paul Rhode, Cameron Shelton, Betsey Stevenson, Alicia Tan, Romain Wacziarg, Ebonya Washington, and seminar participants at Stanford GSB, the London Business School conference on Prediction Markets, the 2006 American Economic Association meetings, the San Francisco Federal Reserve Bank, and Wharton for useful comments. Thanks also to Bryan Elliott for programming assistance.Attached Files
Published - SNOqje07.pdf
Submitted - Snowberg-Wolfers-Zitzewitz_-_Partisan_Impacts.pdf
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Additional details
- Eprint ID
- 11995
- Resolver ID
- CaltechAUTHORS:SNOqje07
- Created
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2008-10-18Created from EPrint's datestamp field
- Updated
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2021-11-08Created from EPrint's last_modified field