We are grateful to Renée Adams, Sambit Bhattacharyya, Chris Skeels, Jeff Williamson, Justin Wolfers, seminar participants at the University of Queensland Business School, two anonymous referees, and the associate editor (Glenn Otto) for comments and suggestions on earlier drafts. In addition, Tim Hatton supplied data on UK unemployment, and Don Harding shared data on Australian business cycles. Susanne Schmidt provided outstanding research assistance. This paper was commenced while the second author was enrolled in a Master of Commerce degree at the University of Melbourne. All data used in this paper, as well as a full dataset of state unemployment rates from 1913–2006, are available from the authors on request. Any remaining errors are ours.
Are State Elections Affected by the National Economy? Evidence from Australia*
Article first published online: 12 MAY 2009
© 2009 The Economic Society of Australia
Volume 85, Issue 269, pages 210–222, June 2009
How to Cite
LEIGH, A. and MCLEISH, M. (2009), Are State Elections Affected by the National Economy? Evidence from Australia. Economic Record, 85: 210–222. doi: 10.1111/j.1475-4932.2009.00549.x
- Issue published online: 12 MAY 2009
- Article first published online: 12 MAY 2009
Using data from 191 Australian state elections, we test how voters respond to economic conditions. We find that unemployment has a strong impact on election outcomes, with each additional percentage point of unemployment reducing the incumbent's re-election probability by 3–5 per cent. However, when we separate luck (unemployment in other states) from competence (unemployment in that state relative to the rest of Australia), we find that both luck and competence are equally important. This is consistent with a psychological theory of the ‘fundamental attribution error’, in which observers consistently underestimate the importance of situational constraints. We also find evidence that unemployment driven by a clearly exogenous source – the US economy – has a non-trivial impact on the re-election probability of Australian state governments. Our results suggest that Australian voters either retain too many state governments in economic booms, vote out too many state governments in recessions, or perhaps both.