Public Choice (2013) 157:367-385
The VP-function revisited: a survey of the
literature on vote and popularity functions
after over 40 years
Michael S.Lewis-Beck & Mary Stegmaier
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Public Choice (2013) 157:367–385
The VP-function revisited: a survey of the literature
on vote and popularity functions after over 40 years
Michael S. Lewis-Beck ·Mary Stegmaier
Received: 8 January 2013 / Accepted: 10 May 2013 / Published online: 6 June 2013
© Springer Science+Business Media New York 2013
Abstract Nannestad and Paldam (Public Choice 79:213–245, 1994) published herein an
extremely inﬂuential review of the literature linking economics and elections, what they
called the “VP functions.” In that work, they offered a number of conclusions, in proposition
form, about the state of the evidence in this ﬁeld. We present the key ones (16 in all), and
assess the extent to which they continue to hold, in light of the new evidence about what
has come to be known as economic voting. As shall be shown, Nannestad and Paldam were
prescient in their early establishment of many of the principal results explaining how the
economy moves the vote choice.
Keywords Economic voting ·Elections ·Popularity ·Vote functions ·Government support
As Nannestad and Paldam (1994: 213) observe, the “VP-function explains the support for
the government as a function of economic and political outcomes.” This early review article,
published in the pages of Public Choice, has had a major impact on the study of economics
and elections. Indeed, according to Google Scholar, it has been cited over 450 times. The
article at hand seeks to revisit this literature, offering an update of VP-function research
and of the ﬁndings from that seminal review. When Nannestad and Paldam (hereafter N&P)
wrote, they were forced to be selective, for they were looking at about 25 years of work,
consisting of close to 200 titles. As we write, we are looking at perhaps 500 titles, making
us, of necessity, still more selective (Lewis-Beck and Stegmaier 2007). To organize our
review, then, we focus on the key conclusions, or propositions, offered up by Nannestad and
Paldam (1994), especially as revealed in cross-national studies. Below, we begin with an
introduction to the general points made by N&P. We go on to look at their more speciﬁc
University of Iowa, Iowa City, USA
M. Stegmaier ()
University of Missouri, Columbia, USA
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368 Public Choice (2013) 157:367–385
ﬁndings, as they appear in light of micro, then macro, investigations. We conclude with a
discussion of what from N&P still holds, and what does not.
The guiding question asks how the economy links to government support, as measured by
votes (in the “vote function”) or by popularity (in the “popularity function”). To the extent
that such a link exists, it has come to be called the “economic vote,” where classically the
voter rewards the government for good economic performance and punishes it for bad (Key
1966;Fiorina1981; Lewis-Beck 1988). According to N&P, the following propositions are
1. The economic vote almost always achieves statistical signiﬁcance.
2. The economic vote almost always registers a strong effect.
These propositions still hold, in established democracies and transitional ones, as demon-
strated by numerous literature reviews and meta-analyses. Paldam himself has made these
points for established democracies in two later V-P essays (Lewis-Beck and Paldam 2000;
Paldam 2004). In an earlier review, Norpoth (1996a) provides an overview of the vote func-
tion ﬁndings and the various dimensions of the economic vote. Anderson (1995), writing
at about the same time, shows that monthly popularity data from Western European na-
tions, 1960–1990, respond to macroeconomic conditions. In an often-cited review article on
the subject, Lewis-Beck and Stegmaier (2000) offer an extensive survey of economic de-
terminants in presidential and legislative elections in the United States, France, Britain and
Denmark, and in less-studied nations. Carrying out a later review, they focus exclusively
on individual-level survey research on economic voting, emphasizing ﬁndings in the most-
studied nations and cross-national studies (Lewis-Beck and Stegmaier 2007). In the same
year, Duch (2007) contributes an essay exploring variations in the magnitude the economic
vote across countries and over time.
Turning to economic voting in transitional democracies, Lewis-Beck and Stegmaier
(2008) examine the emerging literature on economic voting in the democracies of Latin
America, Russia and Eastern Europe, Asia, Africa and the Middle East. Research on these
countries demonstrates that the economy affects voting decisions and election results, de-
spite the newness of democratic elections. In a contemporary state-of-the-discipline piece,
Hellwig (2010) goes on to analyze how the political system, age of the democracy, and
democratic consolidation affect the strength of the economic vote across 77 democracies.
He also demonstrates how politicians might use their constitutional powers, such as calling
early elections, to evade punishment for economic conditions. Finally, in a current exer-
cise, Stegmaier and Lewis-Beck (2013), go online to provide an updateable bibliography on
economic voting investigations for nations around the world.
As the reader can appreciate, review articles themselves are numerous and growing. As a
body, they continue to support the above general propositions suggesting the statistical and
substantive signiﬁcance of the economic vote in democracies everywhere. The following
summary observation in a recent review still rings true: “In terms of ‘issue voting’ models,
the expectation is that economics can be demonstrated generally to be the top issue for the
electorate, both in terms of rank and structural effect” (Lewis-Beck and Stegmaier 2007:
532). Details supporting this judgment will be illustrated along the way, as we focus on
the speciﬁc N&P conclusions that frame our discussion. Below, we examine those conclu-
sions, as they pertain to micro-studies. Then, we turn to macro-studies, before offering ﬁnal
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Public Choice (2013) 157:367–385 369
Tab le 1 Typical economic evaluation survey measures∗
Retrospective Sociotropic Question: Compared to 12 months ago, do you think that the national economy is
now better, about the same, or worse?
Prospective Sociotropic Question: Over the next 12 months, do you think that the national economy will get
better, stay the same, or get worse?
Retrospective Egotropic Question: Compared to 12 months ago, do you think that the ﬁnancial situation of
your household is now better, about the same, or worse?
Prospective Egotropic Question: Over the next 12 months, do you think that the ﬁnancial situation of your
household will get better, stay the same, or get worse?
∗Note: These are stylized versions of typical economic evaluations. Readers can refer to the American Na-
tional Election Study, Eurobarometer, or other election surveys for variations on the question wording
Individual-level election survey investigations (micro-studies) are invaluable because they
overcome the ecological fallacy to which the traditional national-level aggregate investi-
gations (macro-studies) are subject. That is, observed relationships between the macroecon-
omy and national election outcomes might be spurious, a product of some third variable. Vot-
ers themselves, then, would not actually be taking into account economic conditions when
casting their vote. The election survey work of Fiorina (1981)andKiewiet(1983)marked
the shifting emphasis to micro-economic voting studies in the United States (Lewis-Beck
and Stegmaier 2009). Soon thereafter came the Lewis-Beck (1988) investigation of eco-
nomic voting in Western European surveys, so marking the shift in that region. In these sur-
veys, items generally divided themselves along two dimensions: target and time (Kinder and
Kiewiet 1981). “Target” refers to whether the economic circumstances evaluated concerned
the voter’s personal situation (egotropic) or the economy of the nation (sociotropic). “Time”
refers to whether the voter looks forward (prospective) or backward (retrospective) when
evaluating economic performance (Downs 1957;Fiorina1981). Standard survey wording
for these items appears in Table 1. N&P offer two propositions in this regard:
3. Sociotropic economic voting has a greater impact than egotropic voting.
4. Retrospective economic voting has a greater impact than prospective voting.
In the most thorough single-nation study, Kiewiet (1983) demonstrates that in congres-
sional and presidential elections in the United States egotropic effects are weak to non-
existent, compared to strong sociotropic effects of the retrospective type. (Alvarez and Na-
gler (1995), in a later study, reach the same conclusions.) Denmark has also received ex-
tensive study here. Nannestad and Paldam (1997) themselves ﬁnd, exceptionally, that for
the Danish case egotropic evaluations dominate sociotropic ones. They explain this comes
from the presence of a strong welfare state, which Danes may perceive as responsible for
their well-being. However, a recent study thoroughly re-examines the N&P data, and ﬁnds
that egotropic effects are weak after all, while sociotropic ones are strong (Lewis-Beck et
al. 2013). This more standard ﬁnding in fact supports the original ﬁnding of Borre (1997),
in his examination of the 1987, 1990, and 1994 Danish general election surveys.
In a comparative study, Lewis-Beck (1988), looking at repeated surveys from France,
Germany, Italy, Spain, and the United Kingdom, uncovers no pocketbook effects but clear
retrospective and prospective sociotropic effects. In a later, pooled survey analysis of 13 Eu-
ropean nations, Anderson (2000) also ﬁnds a strong inﬂuence from sociotropic retrospective
evaluations, but no inﬂuence from egotropic ones. Executing the largest study thus far on
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370 Public Choice (2013) 157:367–385
economic voting, Duch and Stevenson (2008) examine 165 surveys from 19 countries, and
uncover strong sociotropic retrospective effects.
In a follow-up study, Nadeau et al. (2013), carry out a pooled survey investigation (ten
European nations surveyed four times, 1988–2004), and again uncover strong sociotropic
retrospective effects. Speciﬁcally, they estimate that, if voter perception of past economic
performance changes from “worse” to “better,” a vote in favor of the incumbent becomes
19 % to 35 % more likely, depending on the model speciﬁcation selected. They conclude
the following: “changes in the probability impact rendered by changes in perception of the
economy are not small. Overall, there are serious economic effects on vote intention in
these democracies, and they appear robust against multiple methodological and statistical
challenges” (Nadeau et al. 2013).
The above investigations conﬁne themselves to Europe, but other regions have been sub-
jected to micro-studies as well. In a comparative examination of surveys from Hungary
and Poland, Duch (2001) ﬁnds that through time their citizens have become more trusting
of their democracies, and this has facilitated the link between the economy and the vote.
In a contemporary survey investigation of sub-Saharan African democracies, Bratton et al.
(2012) ﬁnd that voters evaluate the economy and reward or punish the government accord-
ingly. A current survey investigation of another low-income region, Latin America, looks
at sociotropic retrospective voting in a pool of 12 countries across three election periods
(Lewis-Beck and Ratto 2013). They uncover rather strong effects, e.g., a change in the na-
tional economic perception “from “worse” to “better” increases the estimated incumbent
vote probability by .21, not a trivial effect” (Lewis-Beck and Ratto 2013).
With respect to propositions 3 and 4 above, then, they are in the main supported.
Clearly, sociotropic evaluations overwhelm egotropic ones. The relatively strong impact of
sociotropic retrospective evaluations seems equally clear, regardless of whether the democ-
racy is new or old, low-income or high-income. What remains somewhat controversial is the
impact of prospective economic voting. Within the literatures on the United States and the
United Kingdom, studies keep popping up to show signiﬁcant prospective effects (Lockerbie
1992; MacKuen et al. 1992; Price and Sanders 1995; though see Clarke and Stewart 1994
and Norpoth 1996b for important critiques). More recently, Nadeau and Lewis-Beck (2001)
have shown that, in American presidential elections, the economic vote operates mostly in
retrospective fashion when the incumbent runs, and mostly in prospective fashion when the
incumbent does not. In contrast, Campbell et al. (2010), in their own investigation of presi-
dential preferences, claim that no prospective voting exists.
Comparative study seems needed on the prospective question,beyond these single-nation
studies. However, such work is unlikely to be forthcoming, since most researchers seem
to opt for the retrospective, rather than the prospective, speciﬁcation. That in itself helps
indicate that the retrospective evaluations dominate.1
The economic vote may be asymmetric. For example, the government may be punished
more if the economy turns bad than if it remains good. A fair amount of work has been done
on this asymmetric question. N&P arrive at the following conclusion:
5. The economic vote is not asymmetric
In his founding work on presidential popularity and public opinion in the United States,
Mueller (1973) decided there was an asymmetry in the economy’s impact, with a penalty
1One partial exception comes from the investigation of Van der Brug et al. (2007: 181), who ﬁnd that under
conditions wherein responsibility is unclear, the prospective effect might be stronger. We focus further on
such conditionalities below.
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Public Choice (2013) 157:367–385 371
for bad times but no reward for good times. This idea, that negativity makes more of an
impression than positivity, has found some support in later public opinion studies. If voters
tend to be averse to risk, then they will pay more attention to bad news (Lau 1985; Soroka
2006). To the extent that bad news, such as a ﬂagging economy, makes the economic issue
itself more salient, it may weigh more heavily on the vote (Bélanger and Meguid 2008;
Fournier et al. 2003). When the economy goes bad, more people may know about it, because
of discussion in the media (Singer 2011).
What do direct micro-studies on economic voting show regarding the asymmetry hy-
pothesis? In analyzing the American National Election Studies, Kiewiet (1983: 49) found
no evidence favoring it. Looking at a comparative sample of individual European voters,
Lewis-Beck (1988: 79) also gave it no support: “There is no evidence whatsoever that their
vote choices are motivated more by ‘bad times’ than by ‘good times.”’ But a latter sur-
vey investigation, by N&P (1997) themselves, on the Danish case, suggests that a grievance
asymmetry exists, with “worse” economic evaluations appearing to produce a stronger effect
on government support than “better” economic evaluations. However, an American inves-
tigation released at the same time goes against this grievance idea. Speciﬁcally, Haller and
Norpoth (1997), in their examination of the inﬂuence of economic news on economic opin-
ion ﬁnd no effect, so undercutting the saliency argument. For now, we have to conclude that
evidence on proposition 5 remains mixed.
Another issue with regard to sociotropic evaluation concerns its motivation—is it altru-
istic or egoistic? N&P offer the following conclusion here:
6. Sociotropic economic voting is not necessarily self-interested.
The economic vote should be based on self-interest, at least according to a traditional
cost-beneﬁt calculation. Voters select the party that will do more to further their own ma-
terial interests, or so the argument goes. This logic easily works, if economic voters are
egotropic, always voting their own pocketbooks. However, as we have seen, in study after
study, pocketbook effects are weak to nonexistent. Instead, the motivation for the economic
voter, real as it may be, is sociotropic, showing a concern for the material well-being of
the collectivity. This concern for the collectivity has sometimes been interpreted as show-
ing altruism on the part of the sociotropic voter. However as Kinder and Kiewiet (1981:
132), the fathers of the sociotropic concept, state: “Sociotropic voting may proceed out of
altruistic concern for the well-being of all....Alternatively, sociotropic voting may be totally
In a full review of the economic voting literature at the time, Lewin (1991: 45) disallows
the self-interest possibility, asserting that the “results point overwhelmingly against the self-
interest hypothesis,” claiming instead that the sociotropic voter has the public interest in
mind. In a current paper, Kiewiet and Lewis-Beck (2011) attempt to demonstrate that the
sociotropic economic voter may be acting out of self-interest, after all. They begin by re-
calling Kramer’s (1983) distinction regarding the two factors that inﬂuence an individual’s
economic well-being: government policies and everything else (e.g., business cycles, illness
and luck). Reasoning economic voters support the government if its policies beneﬁt them,
and oppose otherwise.
But, in practice, sorting out the “government part” of individuals’ changed economic
well-being is impossible. Kiewiet and Lewis-Beck therefore look at the next best thing,
namely how the economy is performing as a whole. Voters effectively use national economic
performance as a proxy for their personal economic circumstances. Further, they understand
intuitively that when the country prospers they are more likely to prosper. In sum, for these
reasons, the sociotropic voter may be self-interested. Also, of course, the sociotropic voter
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372 Public Choice (2013) 157:367–385
may care only about the public interest, and thus simply favor the party that will better
manage the economy. That is to say, the sociotropic voter may be motived purely by self-
interest, or purely by the public interest. As Kiewiet and Lewis-Beck (2011: 312) conclude:
“Data indicating that voters are sociotropic thus do not allow us to determine why they
are sociotropic.” Accepting this conclusion, we can say that proposition 6 of N&P stands
A critical question concerns the operative mechanism of the economic vote, and how that
mechanism may be modiﬁed. N&P offer the following conclusion:
7. The economic vote is inﬂuenced by interactions with political agents, i.e., it is inﬂuenced
by the clarity of government responsibility for the economy.
For the economic vote to operate, the voter must attribute responsibility for economic
management to the government. Without that link, economic voting should not occur. For
example, if the voter believes the economy to be shaped by private business decisions,
weather conditions, or mere chance, then it makes little sense to blame (or praise) the gov-
ernment for current conditions. However, even if the voter does hold the government re-
sponsible for the economy, the “part” of government held responsible might not be clear.
In the above phrase of N&P, the economic vote is inﬂuenced by interactions with political
agents, which might include the executive, the legislature, the bureaucracy, or the parties. If,
say, there are many parties in the government coalition, responsibility for economic policy
might be less clear, as compared to a government coalition with few parties.
Let us focus on how parties inﬂuence clarity of responsibility, since considerable re-
search has been done here. Powell and Whitten (1993), in their well-known cross-national
macro-analysis, construct an index for measuring the clarity of government responsibility,
and discover its strong relationship to economic voting. In the ﬁrst comparative micro-study
on the subject, Lewis-Beck (1986) demonstrates that diffusion of government responsibil-
ity, as measured by number of parties in the ruling coalition, inﬂuences the size of the na-
tional economic voting coefﬁcient (i.e., in descending order, the United Kingdom, Germany,
France, Italy). Anderson (2000), in his investigation of 13 nations from Eurobarometer sur-
veys, establishes that economic effects strengthen when alternative parties are fewer, and
when there is a large and dominant ruling party.
Later investigations have continued to uncover similar results. Looking at eight European
nations, in surveys over 16 years, Nadeau et al. (2002) show that the greater the clarity of re-
sponsibility, the greater the economic vote. Examining surveys from 15 European countries,
Van der Brug et al. (2007) ﬁnd that economic voting increases when policy responsibility
clariﬁes itself, and when the largest party is the primary target. Duch and Stevenson (2008),
in their investigation of election surveys from 19 countries, also discover that the magnitude
of economic voting varies depending on the concentration of responsibility.
Besides the domestic political context, the international political context can inﬂuence
the clarity of responsibility. In nations with open economies that are especially dependent
on foreign trade, citizens might ﬁnd it difﬁcult to decide whom to hold responsible for eco-
nomic ups and downs. Is it the national government? Foreign governments? International
businesses? In a pioneering study using survey data from multiple nations, Hellwig (2001)
ﬁnds that the more economic interdependence the country experiences, the weaker will be
the economic vote. Examining surveys from 15 European countries, Fernández-Albertos
(2006) discovers that greater economic openness reduces the impact of employment expec-
tations on the vote. These studies, as well as others, have established that “globalization,” as
it has come to be called, can blur the lines of economic authority, thus reducing the magni-
tude of a country’s national economic voting coefﬁcient.
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Public Choice (2013) 157:367–385 373
Thus, the conclusion of Proposition 7, about the role played by clarity of responsibility,
receives very strong support.
We see that voters evaluate the economy, and that these evaluations have consequences
for government support. The implication is that voters know something about the real econ-
omy, and act accordingly. But, how much do voters actually know about the economy? N&P
offer the following proposition:
8. Voters do not have much knowledge about the economy.
In their review essay, Lewis-Beck and Stegmaier (2007: 531) ask, “What information on
the economy do voters have?” Their response, “We know little” about this question, seems
less true now. There are scattered, single nation surveys that have been published (Blendon
et al. 1997;Conoveretal.1986; Holbrook and Garand 1996; Nannestad and Paldam 2000;
Sanders 2000). Early on, for the US case, Conover et al. (1986) reported that, with respect
to macroeconomic indicators, voters tend to make the least error when they estimate the un-
employment rate. In a recent study, Lewis-Beck and Nadeau (2009) show that in the United
States the great majority of voters can estimate the unemployment rate rather accurately.
One reason voters had little knowledge of the real economy, in the view of N&P, was
because of partisan bias. That is, their political preferences clouded their vision of the econ-
omy, so when their own party was in ofﬁce they thought the economy was good, but when
their party was out of ofﬁce they thought it was bad. On this endogeneity—of partisan bias
and economic perception—a considerable amount of work has been done with individual
level survey data. There are at least three such studies that are comparative, and we look
at those. Wlezien et al. (1997), in a cross-national analysis, ﬁnd the magnitude of the eco-
nomic vote reduced, after taking into account the endogeneity of economic perceptions.
Lewis-Beck et al. (2008), in an extended two-stage instrumental variables investigation of
the vote in panel surveys from Canada, the United Kingdom, and the United States, ﬁnd the
economic vote to be even stronger than supposed, once economic perceptions are properly
exogenized. In a subsequent study, Nadeau et al. (2013) again use an instrumental variables
approach to tease out the economic vote in ten European nations. They conclude that, once
the proper statistical corrections are applied, “economic perceptions appear strongly shaped
by the objective economy” (Nadeau et al. 2013). Voter perceptions do, after all, reﬂect the
real economy. In sum, they have stored a good deal of knowledge about the economy, even if
they may not be able to retrieve it readily when asked in a survey item. They have a working
knowledge of it, and they employ this in their economic vote. Therefore, we would have to
say that, at least with respect to the partisan bias question, N&P’s conclusion in proposition
8 does not stand.
Voters do know, at bottom, much more about the economy than N&P supposed. Further
evidence here comes from examining the effects of news media on economic knowledge.
Studies of the American case suggest that following economic news does not add (or detract)
from the economic knowledge voters already possess. Hetherington (1996) explores media
exposure and retrospective sociotropic evaluations in the 1992 presidential election. He tests
his models on the 1984 and 1988 elections and does not ﬁnd a media impact. His ﬁndings
are consistent with Haller and Norpoth (1997), who look at how the media affects public
perceptions about the economy in the 1980s in the United States. Their regression models
show that the economic perceptions of both the “news” and “no news” groups are related
to objective economic measures. Further, “even without beneﬁt of economic news, people
are able to draw an economic picture that mirrors that real thing” (Haller and Norpoth 1997:
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374 Public Choice (2013) 157:367–385
In perhaps the sole relevant comparative micro-study, Duch and Stevenson (2010: 122)
conclude that “individual perceptions about the volatility of the macroeconomy are rea-
sonably well informed; voters appear to understand the extent to which their economies are
subject to shocks from the international economy; and voters who perceive that the variation
in the national economy differs from variation in the global economy seem more inclined to
exercise an economic vote.” And, this conclusion is arrived at without the complications of
instrumental variables or other exogenizing techniques. It seems, after all, the voters do see
the basic contours of the economies in which they live.
We began with micro-studies, in order to avoid the ecological fallacy, while at the same
time arriving at the basic mechanics of the economic vote. This we have done, establishing
that the economic vote largely takes the retrospective and sociotropic form. Such a result
allows us to aggregate up, from individual voters to aggregate national election outcomes,
with random error only. This assertion follows from the ﬁrst macro-proposition from N&P,
9. The macro-ﬁndings on economics and elections reﬂect the micro-processes of economic
As N&P (1994: 224) deduce logically, “Under the sociotropic hypothesis the macro VP-
function is an average of people’s perceptions of the average, i.e., the macroeconomy ...
It is hard to imagine that the perceptions of the same macroeconomic development can
be more different than the actual experiences. Hence, we should get (much) stronger VP-
functions under the sociotropic than under the egotropic hypothesis.” They go on to note,
however, that this formal micro-macro link breaks down if the assumptions change, e.g., if
the retrospective assumption is dropped.
Fortunately, there is a contemporary demonstration that this micro-macro link exists em-
pirically, as well as formally (Lewis-Beck et al. 2013). Using a pool of eight Danish national
election studies (1987–2011), analyzed in various ways, including instrumental variables,
the authors conclude that the “election survey data of Denmark, at least when pooled, reveal
a strong sociotropic economic voting effect that is stable, even exogenous. When an average
shift in these micro-economic evaluations is aggregated to the national level, it shows sub-
stantial change in the national electoral outcome, change that parallels the observed effects
from an average shift in macro-economic indicators such as GDP growth” (Lewis-Beck et
This reconciliation of the micro-macro results, at least as demonstrated in the Danish case
(Lewis-Beck et al. 2013), appears to solve the long-standing Kramer (1983) problem, which
held that the error inherent in cross-sectional survey data prevents it from answering the
relevant questions about economic voting. (Speciﬁcally, Kramer contended these problems
arise due to the lack of variation in national economic conditions at the one point in time
when the survey is conducted.)
In addition, and more to the point for our purposes, this Lewis-Beck et al. (2013) study
avoids the micrological fallacy, which infers macro-patterns of economic-electoral ﬂuc-
tuation solely from individual economic voting behavior (Dassonneville and Lewis-Beck
2012). That is, we now know that these macro-patterns generally emerge from the micro-
patterns recorded in the last section. In the section at hand, we devote ourselves to investi-
gating the extent to which the macro-study conclusions offered by N&P are supported by
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Public Choice (2013) 157:367–385 375
current evidence. The ﬁrst of these concerns the issue of model ﬁt, and is addressed in the
10. The macro-models of economic voting have high R-squareds.
This N&P proposition still seems to hold, at least for single-nation studies. The single-
nation studies invariably analyze aggregate time series data, which generally tend to pro-
duce tighter ﬁts than data assembled in other forms. As an illustration, consider the French
case. Lafay (1985,1991), a pioneer in developing French popularity functions, offers mod-
els with an R-squared =0.77 in an early study, and an R-squared =0.93 in a later study.
With respect to French vote functions, the adjusted R-squareds from three different mod-
els, respectively, can be reported: 0.65, 0.92, 0.71 (Lewis-Beck 1995,1997;Jérômeetal.
1999).2Turning to the British case, Sanders (2000) carried out an extensive examination of
popularity functions (1974–1997), reporting model R-squareds from 0.87 to 0.93, depend-
ing on which economic variables were included. A current popularity function investigation
of the United States (1960–2011, quarterly) gives an R-squared =0.83 (Fauvelle-Aymar
and Stegmaier 2013). With respect to the US presidential vote function itself, the Bread and
Peace model of Hibbs (2012: 636), yields an adjusted R-squared =0.85.
These ﬁt statistics, while selective, do not appear atypical for single-nation macro-
models. However, we are more concerned about multi-nation macro-models, of which there
are fewer (Bellucci and Lewis-Beck 2011; Bengtsson 2004;Benton2005; Carlsen 2000;
Chappell and Veiga 2000;Fidrmuc2000; Pacek 1994; Pacek and Radcliff 1995;Paldam
1991; Powell and Whitten 1993; Remmer 1991; Roberts 2008;Tucker2001; Whitten and
Palmer 1999; Wilkin et al. 1997). These studies look at different regions of the world, focus-
ing mostly on advanced western nations. The investigation by Whitten and Palmer (1999), a
cross-national, European analysis of economic voting in the context of clarity of responsibil-
ity, yields model adjusted R-squareds from 0.83 to 0.93. Bellucci and Lewis-Beck (2011),
examining an aggregate time series pool of popularity functions (France, Germany, Italy, the
United Kingdom, the United States and Spain), ﬁnd an adjusted R-squared =0.81 for their
The ﬁt statistics in these aggregated, cross-national models do not always reach such
elevated heights, however. For example, Roberts (2008), in his contemporary study of eco-
nomic voting in Central and Eastern European nations (ten countries, 34 elections) reports
that his best model yields an adjusted R-squared =0.48. Benton (2005), in an update of
Remmer (1991), investigates how macroeconomic change impacts incumbent support in
the Latin American region (39 elections, 13 countries). The R-squareds for her models of
change in the incumbent party’s support range between 0.67 and 0.70 (see Models 1 and 4).
Lesser model ﬁts are not conﬁned to comparative macro-studies of low-income democ-
racies, but sometimes result from the availability of comparable data across nations, how the
variables are measured, and what political controls are included. Paldam (1991) himself, in
an examination of Western industrial nations (17 countries, 197 elections), aims to explain
change in government vote support as a function of institutional and economic variables.
After extensive testing, his models manage R-squareds in the meager range of 0.00 to 0.09.
Wilkin et al. (1997), looking at economic voting in a world-wide sample of 38 nations, ﬁnd
their best performing model, with just two independent variables, inﬂation and GDP growth,
yields a lowly R-squared =0.13. In stark contrast, Dassonneville and Lewis-Beck (2012),
examining macroeconomic effects on government coalition vote in a large European sample
2It is worth noting that the Standard Error of Estimate, in some ways a better measure of comparative model
ﬁt, follows the same rank-order as these adjusted R-squareds.
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376 Public Choice (2013) 157:367–385
(29 countries, 281 elections), accounting for a range of political factors, including previous
vote share, caretaker government, effective number of parties, and number of parties in gov-
ernment, ﬁnd much higher ﬁt levels. The following are ﬁt estimates for their main model:
OLS =0.71; ﬁxed effects =0.65; random effects (GLS) =0.70. What may we conclude,
then, about proposition 10? Two things: 1. Macro-models for a single nation tend to yield
high ﬁt statistics. 2. Macro-models from multi-nation studies may or may not yield high ﬁt
statistics, depending on how economic measures are constructed and the extent to which
political controls are included.
What macroeconomic variables count for shaping national election outcomes? N&P
wrestle with this question, and make the following conclusion, in proposition 11.
11. Unemployment and Inﬂation, but sometimes Growth, are the most important predictors.
Thus, N&P feature unemployment and inﬂation, in line with the founding popular-
ity function paper for the United Kingdom, that of Goodhart and Bhansali (1970), which
stresses the role of those two variables (not to mention a nod to the Phillips curve, an ar-
gument prevalent then). In a study conducted at about the same time on US congressional
elections, Kramer (1971) found that inﬂation, but even more importantly income, affected
seat shares for the party of the president. Nevertheless, it has become difﬁcult to ﬁnd pa-
pers that point to inﬂation as an important determinant. An exception, perhaps understand-
able, is Remmer’s (1991) study of Latin America, a region that has been plagued with in-
ﬂation waves. (Although Singer’s (2013) investigation shows that this “inﬂation effect” in
Latin America has now dissipated). Less understandable is the recent study by Chappell and
Veig a (2000: 196), who carry out a pooled analysis of 13 Western European nations (136
elections), and report that their “strongest ﬁnding is that voters punish increases in inﬂation.”
The unemployment variable, however, remains a lively contender. Fair (1978) identiﬁes
the change in the unemployment rate and GNP growth as having meaningful effects on US
presidential vote shares. In their path-breaking work, Powell and Whitten (1993), examining
19 industrialized nations (and about 100 elections, 1969–1988), ﬁnd that the key macro-
economic variables accounting for the government vote are unemployment and growth. It
has become increasingly clear that the electoral impact of unemployment change stands
decisive, according to the various pooled studies from Central and Eastern Europe (Fidrmuc
2000; Pacek 1994; Roberts 2008;Tucker2001).
With respect to the growth variable, it, too, has appeared as a prime driver, in multi-
national studies from different parts of the world: Latin America (Benton 2005); low-income
nations (Pacek and Radcliff 1995); Europe (Dassonneville and Lewis-Beck 2012)); a world-
wide sample (Wilkin et al. 1997). What, precisely, is the impact of economic growth? Benton
(2005: 430) suggests that a 1.0 percentage point decline in GDP will produce a 1.7 percent-
age point loss in the incumbent party vote. Wilkin et al. (1997: 307), arrive at a similar
estimate, claiming that “for every percentage point of GDP growth in the election year, [the
major incumbent] party stands to gain 1.4 percent of the vote.”
With respect to proposition 11, then, we would revise it slightly, arguing that now the
“big two” (N&P’s phrase) are unemployment and growth. What does this imply about the
relative importance of macroeconomic change for electoral outcomes? This leads to the next
N&P propositions, as follows:
12. The e-part (economics) is stronger than the p-part (politics).
13. The political variables are weakly measured.
We consider these two propositions together, since the extent to which political variables
are weakly measured could explain the relatively greater importance of the economic part.
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Public Choice (2013) 157:367–385 377
As is known, separating out the relative importance of, say, two independent variables, is
not easy. N&P sometimes imply that the e-part has more strength because it explains more
variance. However, statistically it is not possible to separate variance into uniquely explained
portions, unless the two variables are orthogonal, which they virtually never are. As a heuris-
tic, however, it is helpful initially to consider the class of vote functions from the aggregate
time series models used in the ﬁeld of election forecasting.3These models are almost in-
variably of a simple structure, single equations with as few as two independent variables,
commonly one macro-economic and one macro-political variable. Take the elections most
often forecast, those of the US presidency. The bivariate correlations of economic growth
and presidential approval, respectively, with incumbent vote share have been reported at 0.69
and 0.84 (Lewis-Beck and Rice 1992: Chap. 2). These magnitudes suggest that, in fact, the
p-part has greater strength. However, as the literature on presidential approval has shown,
approval is shaped at least partly by economic growth (and, it cannot be ruled out that growth
maybe inﬂuenced by, although undoubtedly less so, approval). In that case, reciprocal cau-
sation exists, and the simple correlation comparison of effects breaks down. Thus, while it is
suggestive, it is by no means deﬁnitive, and illustrates the problem of ultimately evaluating
the comparative effects of the p- and e-parts.
That the e-part can be captured partly by the p-part has been demonstrated in recent elec-
tion forecasting models, where the small sample size necessitates parsimony. Nadeau et al.
(2009,2010) create two-step forecasting models for the United Kingdom and France. The
ﬁrst step predicts the election result based on a lagged approval measure, without including
any economic measures. This approval measure serves as a proxy for the economic and po-
litical factors that shape it, which is the second step in a system of equations. Thus economic
and political conditions shape popularity, which in turn can be used to forecast the election
A further difﬁculty with an economics versus politics comparison, of course, comes from
the inevitable collinearity present in multiple regression equations based on observational
data. For example, when the two variables of economic growth and presidential approval
(noted above for the US case), are included in an ordinary least squares regression equation,
the R-squared =0.81. This magnitude itself suggests the two variables are intercorrelated,
as in fact they are, at r=0.48 (Lewis-Beck and Rice 1992: 34). Hence, there always exists a
portion of shared variance that cannot properly be assigned to either the e-part or the p-part.
Further, no study we know of has applied a step-wise approach to answer the question, e.g.,
remove from the model the e-part, and note the decrease in variance explained; return the
e-part and remove the p-part, and note again the decrease in variance explained; compare
the two decreases, with the larger one indicating the more important part. Of course, the
difﬁculty here is that stepwise regression violates the classical assumption of correct model
speciﬁcation in the ﬁrst place.
Another approach to sorting out relative importance involves comparing the magnitude
of the structural coefﬁcients, one for economics and one for politics. This implies the same
number of e and p variables, which seldom occurs in extant models. Further, such compar-
ison of coefﬁcients requires the variables to have the same measurement scale or for the
standardized coefﬁcients to be reported.
Still, at the macro-level, there is yet another possibility, which occurs when the single-
equation model has the political dependent variable (of vote) lagged and included on the
3For current reviews of the election forecasting literature on the United States and other countries, see Lewis-
Beck and Tien (2011), Lewis-Beck and Stegmaier (2014), and the annotated bibliography of Stegmaier and
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378 Public Choice (2013) 157:367–385
right-hand side of the equation as part of the speciﬁcation, perhaps as a control for omitted
variables. The coefﬁcient of this independent political variable (Vt−1), can be compared to
the coefﬁcient of the independent macroeconomic variable (Et−1), if the two have the same
measurement. In the current investigation by Dassonneville and Lewis-Beck (2012), such a
comparison is possible, since they have the dependent variable (incumbent coalition parlia-
mentary vote share in percent) included also as a lagged independent variable (measured as
the incumbent coalitions’ vote share in the previous parliamentary election), next to a lagged
macroeconomic variable (GDP growth in percent for the year before the election). One sees
that for their preferred model (random effects GLS) the GDP coefﬁcient =0.68, the lagged
incumbent coefﬁcient =0.73. Thus, these p- and e-parts appear about equal in terms of
their impact, when either changes by one percentage point.4Further, we can say that both
are strongly, rather than weakly, measured. Moreover, we can argue that both variables are
global in character, each encompassing many components of their respective processes. Fi-
nally, we note that this comparative macro-study is the largest economic voting study of this
type. Even allowing for possible bias in the coefﬁcient estimate of the p-part (because it is a
lagged dependent variable), the e-part would not likely appear stronger, as N&P conclude.
More nearly, they appear close to equal.
Because most of the macro-models are dynamic, it becomes possible to judge the effec-
tive time horizon of the economic voter. N&P offer the following proposition in that regard:
14. The voters are myopic, with a typical memory of one year.
At the macro-level, assuming annual aggregate time series data, this proposition implies
a lag structure of t−1. However, at least in single-nation studies, the models, as estimated,
have employed varying lags. These differences had been of some concern in the literature,
because the inconsistencies generally do not seem to have a logical basis. Nevertheless, the
search for the preferred “lagged effects pattern, has been largely abandoned,” accordingly
to Lewis-Beck and Stegmaier (2000: 186). This conclusion appears to hold today. Conven-
tion has taken the place of the search, and virtually all macro-studies assume a short lag,
generally of one year. This convention has practical value, allowing more standardization
in comparison of effects (much like the convention of statistical signiﬁcance at 0.05 allows
such comparison). The myopia assumption, as it were, does continue to prevail in the liter-
ature, as N&P assert; but it wants hard testing in order discover if it is indeed preferred.
With respect to the political contribution to the VP function, N&P have argued that gov-
ernments, by their (mis)deeds, tend to experience an erosion of support over time. They offer
the following proposition:
15. Incumbents incur a cost of ruling.
The idea is that governments pay a cost for being in ofﬁce. Over time, they strike bargains
and create enemies, and their supporters become disillusioned and withdraw. The general
elections of the United Kingdom offer a good example. The government vote share can be
expressed as a function of government approval, economic performance, and time in ofﬁce
(Lewis-Beck et al. 2004). The time in ofﬁce variable, T, measures how many terms the party
has served; its coefﬁcient estimate is −3.1, indicating that the government can expect to lose
about three percentage points when it runs for re-election.
4But, as we noted earlier with regard to the use of approval as an independent variable, here vote (t −1)
is inﬂuenced by the economic conditions leading up to that earlier election, underscoring the complexity
involved in identifying the strength of the p- and e-parts.
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Public Choice (2013) 157:367–385 379
What of the available comparative data? Paldam (1991: 19), employing a sample of 197
elections from advanced industrial democracies, estimates the “cost of ruling” as a loss of 1.6
percentage points in government vote share, from the previous election. What is a contem-
porary estimate? Dassonneville and Lewis-Beck (2012) have carried out the most current
and largest comparative VP study at the macro-level, on 284 elections from 29 European
countries. They ﬁnd that at time t incumbent vote share (for all the parties in the coalition)
= 49.61, while at time t−1=44.04, suggesting an average loss from one election to the
next of 5.57 percentage points. When this variable of incumbent vote share at t−1 makes
itself part of the multivariate speciﬁcation of incumbent vote share at t, they show that it
achieves a coefﬁcient =0.68, which suggests that for every 10 percentage points of support
the government garnered in the last election, it can expect to lose about 3 percentage points
in the current election. Clearly, then, N&P’s proposition that it costs incumbents to rule still
holds; if anything, it is stronger than ever.
Last, but by no means least, is the N&P proposition about the variability of coefﬁcients
in the VP function. They draw the following conclusion:
16. VP functions manifest a lack of stability.
In later work, Paldam asks “is the instability of the VP-function apparent or inherent?”,
going on to conclude that “Most of the observed instability is apparent, and can be taken ac-
count of by proper speciﬁcation of institutional conditions” (Lewis-Beck and Paldam 2000:
119–120). We have already discussed how the number of government coalition parties can
inﬂuence clarity of responsibility and, ultimately, the strength of the economic vote. There
are, of course, other political or institutional contexts to consider. One concerns the arrange-
ment of executive power. To the extent that executive authority centralizes itself in a single
powerful ruler, the responsibility for managing the economy becomes less ambiguous.
As an example, consider the two-nation study by Lewis-Beck and Nadeau (2004), com-
paring the economic coefﬁcient for the popularity of the French and the American presi-
dents, under changing executive arrangements. In particular, what happens when the system
moves from uniﬁed government to cohabitation5(the French case) or to divided government
(the American case)? They demonstrate that in France the presidential economic coefﬁcient
registers 4.5 when there is no cohabitation, but only 1.6 under cohabitation (when the prime
minister’s economic coefﬁcient rises from 2.7 to 5.1). For America, in contrast, divided gov-
ernment does not signiﬁcantly alter the economic coefﬁcient for the presidential popularity
function (Lewis-Beck and Nadeau 2004: 143). In sum, these institutional features may (or
may not) affect the economic vote; knowing of their existence and taking them into account
in the speciﬁcation of the popularity function enables us to exchange the apparent instability
for stable structural explanation.
Another contextual factor is whether a country is governed by a single party or a coali-
tion. If there are coalitions, should the coalition parties collectively beneﬁt from economic
growth, or do voters target speciﬁc parties within the coalition? Anderson (1995) compares
the economy’s impact on government approval in the Netherlands, Denmark, and Germany,
all countries with coalition governments. He concludes that for the coalitions as a whole, the
economy has a weak impact, but that voters instead assess the coalition partners separately
based on their issue priorities. In a more recent study based on survey data from six German
Bundestag elections, Debus et al. (2013) test the impact of positive economic assessments
on votes for (1) the incumbent coalition parties collectively, (2) the party of the Chancellor,
5Cohabitation is when the French President and Prime Minister hail from different political parties.
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380 Public Choice (2013) 157:367–385
and (3) the party that controls the ministries of economics and ﬁnance. For the coalition
parties collectively, the economic vote exists in just three of the six elections. The economic
vote for the party controlling the key economic ministries is also unstable. However, the
consistent ﬁnding is that the Chancellor’s party reaps rewards in all six Federal elections
when voters evaluate the economy positively.
VP functions may also appear to generate unstable coefﬁcients due to the fact that almost
all popularity studies have been for single nations, using different measures, lags, time pe-
riods and model speciﬁcations. Much of the noise from these differences can be eliminated
with consistent measurement, time period and speciﬁcation, over a large sample. Bellucci
and Lewis-Beck (2011) take such steps in a recent paper, looking at a single popularity func-
tion estimated with the same measures on a large pooled time series from France, Germany,
Italy, Spain, the United Kingdom, and the United States. They show that economic effects
are strong across the sample, and not inﬂuenced signiﬁcantly by country context (once in-
stitutional features are controlled by a lagged dependent variable on the right-hand side). In
other words, with proper sampling, measurement and modeling, considerable stability in the
popularity function is observed.
Given the foregoing, we have to conclude that the original N&P proposition, arguing
for lack of stability of the VP function, would be better rephrased to read as follows: VP
functions tend to be rather stable, once relevant institutional features are incorporated into
the speciﬁcation. The observed instability, in other words, is more apparent than real.
4 Summary and conclusions
We commemorate the publication twenty years ago of the pivotal VP-function review by
Nannestad and Paldam (1994). To structure our current review, at the same time providing
continuity with the N&P paper, we assess the conclusions they arrived at there. These con-
clusions, or propositions, number 16 and apply generally both to micro- or macro-studies.
As a summary, we list them all in Table 2, along with an assessment of whether or not they
are now supported, according to our overall assessment of the economic voting literature to
date. The ﬁrst two propositions receive unambiguous support. These are perhaps the most
important propositions, for they establish the presence and strength of the economic vote in
democracies around the world.
What of the micro-studies? Clearly, the dominant form of economic voting is sociotropic,
a form which may be altruistic or self-interested and conditioned by the clarity of govern-
ment responsibility for economic policy, as N&P found (propositions 3, 6 and 7). However,
contrary to N&P, the sociotropic economic vote might also be prospective or even asym-
metric (evaluation of propositions 4 and 5). And, ﬁnally, with respect to the micro-level,
N&P were wrong about voters not having much knowledge of the economy (evaluation of
proposition 8). Voters do seem, in fact, to know a good deal about the state of the economy.
What about the macro-studies? At this level, N&P were the ﬁrst to establish two im-
portant propositions that continue to hold. For one, the observed links between macroeco-
nomics and national election outcomes are buttressed by, indeed reﬂect, the micro-processes
by which individual economic voters arrive at their decisions. Thus, these two levels of anal-
ysis operate in tandem, rather than in opposition (proposition 9). For another, incumbents in
democracies have to pay a cost for ruling, in terms of votes lost when they run for re-election
(proposition 15). However, other macro-ﬁndings reported by N&P appear mixed now. They
seem to have been overly optimistic about the possibility of achieving high goodness-of-
ﬁt statistics for the models studied (evaluation of proposition 10). As well, they seem to
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Public Choice (2013) 157:367–385 381
Tab le 2 Nannestad and Paldam (1994) conclusions on VP-functions, with an assessment of their current
1. The economic vote almost always achieves statistical signiﬁcance (+)
2. The economic vote almost always registers a strong effect (+)
3. Sociotropic economic voting has a greater impact than egotropic (+).
4. Retrospective economic voting has a greater impact than prospective (+/−).
5. The economic vote is not asymmetric (+/−).
6. Sociotropic economic voting is not necessarily self-interested (+).
7. The economic vote is inﬂuenced by interactions with political agents (+).
8. Voters do not have much knowledge about the economy (−).
9. The macro-ﬁndings mirror the micro-processes of economic voting (+).
10. The macro-models of economic voting have high R-squared (+/−).
11. Unemployment and Inﬂation, maybe Growth, are the important predictors (+/−).
12. The e-part, economics, is stronger than the p-part, politics (−).
13. The political variables are weakly measured (−).
14. Voters are myopic, with a typical memory of one year (+/−).
15. Incumbents incur an electoral cost of ruling (+).
16. VP-functions manifest a lack of stability (−).
∗(+)=support for proposition in the literature; (+/−)=mixed support for proposition in the literature;
(−)=lack of support for proposition in the literature
have exaggerated the predictive role of inﬂation, at the expense of growth (evaluation of
proposition 11). In addition, their sanguinity about voter myopia seems to rest more on
reﬂexive practice, than on actual testing of alternative time speciﬁcations (evaluation of
With respect to the macro-studies, the most noteworthy errors come from their conclu-
sions that the e-part dominates the p-part, and that the models are unstable. What we see in-
stead is that, when both the economic and political variables are comparably measured, they
tend to have about equal weight, at least within the single-equation constraint (evaluation
of propositions 12 and 13).6Furthermore, once model speciﬁcation takes into account the
relevant institutional and political features of the democratic system(s) under investigation,
the models appear inherently stable, functioning according to known structural imperatives
(evaluation of proposition 16).
Overall then, many of the N&P propositions are still standing, and these tend to be the
more important ones on the list. These amount to conﬁrming that, generally speaking, the
economic vote, at the micro- or macro-levels, has statistical and substantive signiﬁcance
in democratic political systems. Moreover, for the citizen, the economic vote can be char-
acterized as sociotropic and subject to changing institutional contexts that alter the clarity
of responsibility, and thus the weight, of the economic vote. We would ourselves add that,
rather than a sign of instability, these changing weights for the economic vote merely reﬂect
the choices a reasoning voter makes.
6When indirect effects and reciprocal links between economic and political variables are taken into account,
in systems of equations, this judgment may be qualiﬁed.
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382 Public Choice (2013) 157:367–385
Acknowledgements The contributions of Martin Paldam to the ﬁelds of economics and political science
are many. For us, foremost are his contributions to economic voting, that is, to tracing out the lines of con-
nection between the economy and the democratic vote. His early work is well-represented in his seminal
paper with Peter Nannestad, a paper honored in the review at hand. Martin’s work was pioneering, and most
of his key ﬁndings have withstood the test of time as this review demonstrates. Moreover, his current efforts
continue to shape the research agenda of political economists the world over. To Martin Paldam we scholars
of economic voting owe a great debt.
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