Partisan Cycles in Congressional Elections and the Macroeconomy

Alberto Alesina, Howard Rosenthal

NBER Working Paper No. 2706
Issued in September 1988
NBER Program(s):The Monetary Economics Program

The post-war United States exhibits two rather strong politico-economic regularities. The political regularity is that the party of the President has always lost votes in aid-term Congressional elections, relative to its Congressional vote in the previous elections; the economic regularity is that Republican administrations exhibit below average economic growth in the first half of each term and Democratic administrations are associated with above average growth in their first half. In the second halves economic growth is similar under the two administrations. We provide a rational expectations model which can explain these two regularities. In Presidential elections voters have to choose between two polarized candidates; mid-term elections are used to counterbalance the President's policies by strengthening the opposition in Congress. Since presidents of different parties are associated with different economic policies, our model predicts a (spurious) correlation between the state of the economy and elections. The predictions of our model are in sharp contrast with those of traditional retrospective voting models in which voters simply reward the incumbent if the economy is doing well immediately before the election. Our empirical results suggest that our model performs at least as well and often better than alternative models. In addition, we question previous claias that voters are short sighted and naively backward looking.

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Document Object Identifier (DOI): 10.3386/w2706

Published: American Political Science Review, vol. 83, no. 2, pp373-398, June 1989

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