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Peltzman: Economic conditions and gubernatorial elections

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Peltzman. 1987. Economic conditions and gubernatorial elections. American Economic Review 77.

In Brief

Voters do hold governors accountable for economic conditions, but surprisingly, they hold them accountable for national economic trends, not local ones. Since most gubernatorial elections are held concurrently with midterm Congressional elections, this finding suggests that voters use these midterm elections to send a message to the White House, demanding that it change its ways before the next presidential election.

Place in the Literature

For other accounts of gubernatorial elections, see also Carsey and Wright (1998) and Chubb (1988).


Peltzman uses data from 269 postwar gubernatorial elections, which excludes a few one-party states and states that don't have four-year terms for the governors. Conceptually, the empirical model uses (X1) the electorate's predisposition to vote for a governor and (X2) changes in voters' economic welfare to predict (Y) the gubernatorial vote share. Operationally, it looks something like this:

X1: Electorate's predisposition

  • Dummy for whether the governor is running for reelection
  • The incumbent (party)'s share in the last election. Since this variable will include the electorate's expectations about economic performance, it would make little sense for Peltzman to use raw economic variables in the next section--only economic surprises will matter. As such, all the economic variables are expressed in terms of change: Percent change in income, change in the inflation rate, etc.

X2: Changes in economic welfare

Peltzman measures per capita income growth (over the 12 months prior to the election) at both the state and the national level. At the national level, this is interacted with a presidential dummy (+1 if the governor belongs to the president's party, -1 otherwise). In regressions 1 and 2, Peltzman finds that the state-level data doesn't seem to matter much, nor does the difference between state and national growth. Voters are rewarding/punishing governors for national economic conditions. Interestingly, challengers from the president's party profit more from economic growth than incumbents do.

In regressions 3 and 4, Peltzman adds a measure of the change in the (national) inflation rate, also interacted with the presidential dummy. This variable has borderline significance (primarily in the interaction, suggesting that challengers and incumbents from the president's party get roughly the same advantage).

Peltzman also tries using unemployment data (no results given), which yields no advantage over the data presented.

The only state-level variable that has an effect is a measure of the state budget. When governors expand the state budget (relative to personal income levels), voters punish the governor slightly.

Summary and Discussion

Voters "vote as if they understand that national rather than local policies have the dominant effect on their income. . . . They do this, on the evidence here, by holding gubernatorial candidates of the president's party hostage to the perceived effectiveness of his macro policy and by ignoring local idiosyncrasies."