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At the aggregate level, considerable cross-national variation in economic voting results. ... Cross-national diversity of media. Institutional contexts. Implications for EV Models? ...

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Why the economy l.jpg

Why the Economy?

Raymond Duch

University of Houston

Randy Stevenson

Rice University

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Research Puzzle variation in economic voting results.

  • We suspect individual-level economic voting models vary significantly cross-nationally.

  • But current published modeling efforts are not rich enough to draw meaningful conclusions.

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Our Insights variation in economic voting results.

  • Economic evaluations are attitudes – information processing, cueing and cognitive psychology literature.

  • Measure extent to which economic information is “mediated”.

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The Research Project variation in economic voting results.

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Mediated Economic Cues variation in economic voting results.

  • Citizens employ cues/information short-cuts in forming economic assessments

    • Luppia & McCubbins argument

    • Nevertheless information gathering costs matter

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Distortions depend on: or “packaging” of messages

  • Information gathering costs

  • Cross-national diversity of media

  • Institutional contexts

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Implications for EV Models? or “packaging” of messages

  • Economic evaluations are based on distorted information

  • Seriously questions the “democratic accountability” theory of EV

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Null hypothesis or “packaging” of messages

  • Economic perceptions and actual economic outcomes track each other in a regular fashion

  • The series are co-integrated and can be modeled as an ECM

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Mediated cues argument or “packaging” of messages

  • There is distortion in mass assessments of economic outcomes.

  • This distortion is a function of mediated messages regarding the economy (media, politicians, etc.)

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Hypothesis or “packaging” of messages

  • Distortion evidenced by poor ECM fit.

  • Mediation implies degree of distortion correlated with cost of information

    • High for unemployment

    • Low for inflation

  • Mediation implies asymmetric effects

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Data in degrees of distortion

  • Mass public’s economic assessments:

    • Monthly consumer confidence surveys conducted by the European Commission in all member countries 1986-2000

  • Elite’s economic assessments

    • Monthly business confidence surveys from European Commission 1967-2000

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  • Economic indicators in degrees of distortion

    • Quarterly GDP growth from OECD (Palmer and Whitten) CPI and unemployment figures from The Economist

  • All variables are transformed into standardized z scores

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Modeling Economic Attitudes in degrees of distortion

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The error correction model in degrees of distortion

  • DProInfit = ai-d[ ProInfit-1- t1INFit] +b1DINFit+1 + eit

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d in degrees of distortion =

t-test on d indicates significance of co-integration

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  • t in degrees of distortion1 =

  • long term multiplier for the effect of a change in the real economy on economic expectations

  • Expectation is that t1= 1

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Results in degrees of distortion

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CPI and Price Expectations in degrees of distortion

  • d (ECM) parameter significant in all but one country (Italy)

  • The long term relationship between CPI and Price Expectations captured by t1 is significant and close to 1 as expected

  • Note the asymmetry -- t1 is larger when inflation increasing

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Unemployment and Unemployment Expectations in degrees of distortion

  • d (ECM) parameter significant is not significant

  • Suggesting the two series are not co-integrated.

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General Economy & GDP in degrees of distortion

  • d (ECM) parameter significant in all countries

  • The long term relationship between general economy and GDP captured by t1 is significant and close to 1 in vast majority of case

  • Asymmetry in t1 is less consistent but evident

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Cross national variation in degrees of distortion

  • Note there is cross-national variation in

    • The magnitude of t1

    • The incidence of asymmetry

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Conclusions in degrees of distortion

  • Perceptions of the economy and the real economy are in many cases co-integrated and seem to fit an error correction process

  • There is evidence of distortion

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Cross-national variation cues

  • Long-term equilibrium relationship between series

  • Asymmetry varies by nation

  • Suggests role of mediated economic information

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What Drives Popularity Series? cues

  • Subjective assessments of the economy – which we think are shaped from mediated representations of the economy?

  • Or, the real economy?