51 Pages Posted: 21 Jun 2015 Last revised: 14 Sep 2017
Date Written: September 12, 2017
The well-documented rise in political polarization among the U.S. electorate over the past 20 years has been accompanied by a substantial increase in the effect of partisan bias on survey-based measures of economic expectations. Individuals have a more optimistic view on future economic conditions when they are more closely affiliated with the party that controls the White House. Further, individuals see a sharp rise in relative optimism when the party they support wins the Presidency. Both of these effects are becoming larger over time. Using administrative household spending data, we are unable to find evidence that those most likely to support the winning candidate increased spending after any of the elections. For example, despite the substantial rise in survey-based measures of economic expectations among those most likely to support Donald Trump since November 2016, we are unable to detect higher actual spending on auto purchases among this group after the election. Partisan bias is exerting a stronger influence on economic expectations over time, but shifts in economic expectations driven by partisan bias do not appear to have a size-able effect on household spending.
Keywords: consumer confidence, government, economic, policy, sentiment, news, noise, spending, consumption, elections, voting, polarization, Trump, elections
JEL Classification: E20, E21, E60
Suggested Citation: Suggested Citation
Mian, Atif R. and Sufi, Amir and Khoshkhou, Nasim, Partisan Bias, Economic Expectations, and Household Spending (September 12, 2017). Fama-Miller Working Paper; Chicago Booth Research Paper. Available at SSRN: https://ssrn.com/abstract=2620828 or http://dx.doi.org/10.2139/ssrn.2620828