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STOCK OWNERSHIP AND CONGRESSIONAL ELECTIONS: THE POLITICAL ECONOMY OF THE MUTUAL FUND REVOLUTION

Authors

  • JOHN V. DUCA,

    1. Duca: Vice President and Senior Economist, Research Department, Federal Reserve Bank of Dallas, P.O. Box 655906-5906, Dallas, TX 75265. Phone 1-214-922-5154, Fax 1-214-922-5194, E-mail john.v.duca@dal.frb.org
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      We would like to thank Alan Viard, two anonymous referees, and session participants at the American Economic Association, Western Economic Association International, and American Political Science Association meetings for suggestions. We also thank Daniel Wolk, Jamie Lee, and Christine Rowlette for excellent research assistance. The views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System. Our study analyzes shifting political trends and in no way should be interpreted as endorsing or criticizing any political party or figure. Any remaining errors are ours alone.

  • JASON L. SAVING

    1. Saving: Senior Economist, Research Department, Federal Reserve Bank of Dallas, P.O. Box 655906-5906, Dallas, TX 75265. Phone 1-214-922-5167, Fax 1-214-922-5194, E-mail jason.saving@dal.frb.org
    Search for more papers by this author
    • *

      We would like to thank Alan Viard, two anonymous referees, and session participants at the American Economic Association, Western Economic Association International, and American Political Science Association meetings for suggestions. We also thank Daniel Wolk, Jamie Lee, and Christine Rowlette for excellent research assistance. The views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System. Our study analyzes shifting political trends and in no way should be interpreted as endorsing or criticizing any political party or figure. Any remaining errors are ours alone.


Abstract

We find that higher stock ownership rates are linked to an upward shift in the Republican share of the House popular vote since the late 1980s, consistent with theories that property interests affect voting. To proxy for discontinuous stock ownership rates, we use equity mutual fund costs, which have fallen, are negatively correlated with stock ownership rates and the Republican vote share in the long run, and help explain short-run changes along with midterm elections, economic conditions, and presidential popularity. Findings suggest that the major parties’ shares of the House popular vote will fluctuate around 50% until other factors trigger a political realignment. (JEL D72, G11)

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