The Effect of Local Economic Shocks on Local and National Elections
We study the reaction of voters to shifts in local economic conditions. Using the departure from the gold standard of US trading partners in 1931 and the US in 1933, we exploit heterogeneity in export destinations, creating local differences in expenditure-switching in US counties by isolating the aggregate effects of the monetary shocks using time fixed effects. We find significant changes in local voting behavior in response to both shocks, one originating abroad, and another domestically. The response to both shocks have similar magnitude. We argue that voters punished and rewarded incumbents regardless of the shocks’ origin, implying strong feedback from economic conditions to electoral outcomes.
Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.
Suggested Citation
Herreño, Juan, Matias Morales, and Mathieu Pedemonte. 2023. “The Effect of Local Economic Shocks on Local and National Elections.” Federal Reserve Bank of Cleveland, Working Paper No. 23-08. https://doi.org/10.26509/frbc-wp-202308
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