For the economic vote to work as a mechanism of democratic accountability, voters need to be able to properly assign responsibility for economic performance (Ashworth 2012). In “Presidential Success and the World Economy” we show that this assumption does not always hold. The paper examines the extent to which Latin American presidents are punished and rewarded by economic conditions that were brought about by factors beyond their control. We find, in a nutshell, that this misattribution happens very often, at least in a subset of countries in the region, and argue that this severely limits democratic accountability in the region.
Our general empirical strategy in the paper is to predict presidential reelection and approval ratings using only international variables that are exogenous to any action taken by presidents, but that have substantial impact in economic performance. The logic of the argument is that these factors should not predict the political outcomes if voters actively discounted “chance” when evaluating presidents based on economic outcomes.
It has been long established in the Economics literature that commodity prices and US interest rates largely influence the domestic economic performance of countries in Latin America (see, for instance, Malan & Bonelli 1977). Commodity prices operate through trade, as most countries in the region are commodity exporters (Maxfield 1998, Gavin, Hausmann & Leiderman 1995, Izquierdo, Romero & Talvo 2008). International interest rates operate through the financial channel, as capital flows to emerging economies tend to respond to the international costs of capital (Calvo, Leiderman & Reinhart 1996, Santiso 2003). The first contribution of the paper is to combine these two variables into the “Good Economic Times Index” (GET), which provides a cogent summary of the recent economic history of the so-called low-savings-commodity-exporting (LSCE) countries of the region, mostly those in South America.
Interestingly, the GET index is a very strong predictor of presidential success in the LSCE countries, but not in the comparison group. In a set of all free and fair elections in the region since 1980, we estimate that an increase from the 25th to the 75th percentile of GET is associated with almost 0.5 higher probability of reelection (understood as either personal reelection or election of the incumbent sponsored candidate) in LSCE countries. GET also predicts the presidents’ popularity in Brazil — the largest LSCE country — since the late 1980s, but not in Mexico — the largest country in the comparison group. A one standard-deviation increase in GET leads approximately to a 15% increase in popularity over an 18 month period. GET, alone, has the same predictive power as a large set of domestic economic variables.
Our results stand in contrast to recent empirical work, mostly on developed democracies, which shows that voters’ capacity to assess and discount the impact of exogenous factors enables them to punish and reward incumbents exclusively for outcomes of their own making (Duch & Stevenson, Kayser & Peress etc). Authors have suggested that this capacity develops as citizens observe the global economy and benchmark their country’s performance. In our paper, we conjecture that inward-looking models of development, citizens’ relatively low media consumption, and relatively low levels of political and economic integration limit Latin American voters’ awareness of regional trends. As a result, citizens lack the elements to benchmark their country’s economy, and to discount the impact of common exogenous shocks. Without this discounting, the power of the economic vote to hold leaders accountable is severely curtailed, as presidents are rewarded/punished for their good/bad luck.
We are currently conducting follow-up research to examine three important extensions of these findings. The first is to examine experimentally the conditions under which voters manage to discount exogenous factors when evaluating the president, or to overcome their “attribution bias.” The other is to determine theoretically and empirically — also through experiments — how presidents behave when they know their fate is determined by exogenous factors, a topic that speaks to literature on populism and corruption. Finally, we are looking at the role of local media in enabling voters to correctly assign responsibility for economic performance.
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