“Real Effects of Markets on Politics: Evidence from U.S. Presidential Elections” by Dr. Leming Lin
Dr. Leming Lin
Assistant Professor of Finance
University of Pittsburgh
Despite the economic importance of the U.S. stock market, there is strikingly little evidence of its impact on elections. Using county-level variation in stock market participation, we document a causal impact of market returns on election outcomes. High-participation counties are more likely to vote for the incumbent party when the market has performed well relative to low-participation counties. The effect is weaker in Republican-leaning counties and more politically active counties, and comes mostly through the intensive margin rather than affecting turnout. Our findings provide evidence of a novel channel through which stock market fluctuations could be transmitted into the real economy.