A Model of the Political Economy of the United States

67 Pages Posted: 28 Dec 2006 Last revised: 27 Jul 2007

See all articles by Alberto F. Alesina

Alberto F. Alesina

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

John Londregan

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Political Science

Howard Rosenthal

New York University

Date Written: February 1991

Abstract

We develop and test a model of joint determination of the rate of economic growth and the results of presidential and Congressional elections in the United States. In our model, economic agents and voters have rational expectations. Economic policy varies as a function of control of the White House and the two-party shares in Congress. Politics affects growth through unanticipated policy shifts following the outcome of presidential elections. The economy influences elections as voters use past realizations of growth to make rational inferences about the "competency" level of the incumbent administration. Elections are also influenced by voters using their midterm Congressional votes to moderate the policies of the incumbent administration. The theoretical model is used to generate a recursive system of equations in which the dependent variables are the growth rate and the vote shares in presidential and Congressional elections. The theory implies several restrictions on the equations. Tests of the restrictions generally support the model; however, the results support the traditional view of naive retrospective voting as well as the "rational" retrospective voting posited in the model.

Suggested Citation

Alesina, Alberto F. and Londregan, John and Rosenthal, Howard, A Model of the Political Economy of the United States (February 1991). NBER Working Paper No. w3611. Available at SSRN: https://ssrn.com/abstract=471555

Alberto F. Alesina (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8388 (Phone)
617-495-7730 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John Londregan

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Princeton University - Department of Political Science ( email )

Corwin Hall
Princeton, NJ 08544-1013
United States

Howard Rosenthal

New York University ( email )

19 W 4th St
New York, NY New York 10012
United States
4155199591 (Phone)
4155199591 (Fax)

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