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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

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Why the Economy?

Raymond Duch

University of Houston

Randy Stevenson

Rice University


Cross-national Studies of Economic Voting


  • At the individual level, limited efforts to understand cross-national variation.

    • Lewis-Beck 1988

    • Paldam 1991

  • Nonetheless some interesting differences in model results cross-nationally


  • At the aggregate level, considerable cross-national variation in economic voting results.

  • “Clarity of responsibility” is one effort to help understand – but limited.


Research Puzzle

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

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


Our Insights

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

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


The Research Project


Mediated Economic Cues

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

    • Luppia & McCubbins argument

    • Nevertheless information gathering costs matter


  • Political actors, elites, media attempt to shape these cues or “packaging” of messages

    • Zaller on the strategic manipulation of media by political actors

    • Iyengar on framing


  • Distorted messages regarding economy?

    • Some evidence from analyses of different media

      • Negativity bias

      • Human interest bias


Distortions depend on:

  • Information gathering costs

  • Cross-national diversity of media

  • Institutional contexts


Implications for EV Models?

  • Economic evaluations are based on distorted information

  • Seriously questions the “democratic accountability” theory of EV


Null hypothesis

  • 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


Mediated cues argument

  • There is distortion in mass assessments of economic outcomes.

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


Hypothesis

  • 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


  • Mediation also implies considerable cross-national variation in degrees of distortion

  • Mediation implies distortions in both mass and elite economic assessments


Data

  • 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


  • Economic indicators

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

  • All variables are transformed into standardized z scores


Modeling Economic Attitudes


The error correction model

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


d =

t-test on d indicates significance of co-integration


  • t1 =

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

  • Expectation is that t1= 1


Results


CPI and Price Expectations

  • 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


Unemployment and Unemployment Expectations

  • d (ECM) parameter significant is not significant

  • Suggesting the two series are not co-integrated.


General Economy & GDP

  • 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


Cross national variation

  • Note there is cross-national variation in

    • The magnitude of t1

    • The incidence of asymmetry


Conclusions

  • 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


  • There is also evidence that distortion results from mediated cues

    • Economic outcomes that are costly to monitor (unemployment) are perceived less well by the mass public than easily monitored outcomes (CPI)

    • Asymmetry in reactions to positive and negative economic news


Cross-national variation

  • Long-term equilibrium relationship between series

  • Asymmetry varies by nation

  • Suggests role of mediated economic information


The economy, economic attitudes and political preferences


What Drives Popularity Series?

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

  • Or, the real economy?


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