Local Economic Performance and Election Outcomes‪.‬

Introduction Recent election results and their seeming connection to the state of the economy have revived study into the relationship between economic performance and voter behavior. The study of this topic is not new. The political business cycle (PBC) theory was first examined by Nordhaus [1975], McRae [1977], and Hibbs [1977, 1986]. Nordhaus and McRae hypothesized the idea of a 'political business cycle,' whereby the incumbent government attempts to manipulate the macroeconomy to increase the probability of reelection. Hibbs rejects this idea and instead discussed the notion of a 'partisan theory,' whereby different political parties will have different economic goals that they hope to implement for their perceived constituents. For example, Democratic politicians will tend to propose policies that will reduce unemployment and Republican politicians will favor policies that reduce inflation because that is what each respective party's partisans are concerned with [Smyth and Taylor, 1992a]. In a more recent paper, Besley and Case [2003] examine a variety of political and economic policies and the institutions that create them.