Economic policy

Deeply Divided Elections Harm Economic Policy

As political polarization has grown in recent years, the path of U.S. economic policy increasingly depends on which party is in power, write Northwestern’s Scott R. Baker, Stanford doctoral candidate Aniket Baksy, Nicholas Bloom and Jonathan A. Rodden of Stanford, and Steven J of Chicago Booth. Davis. Hotly contested national elections can sow uncertainty, which can in turn lead to business and consumer indecision, which ultimately dampens the overall economy.

And as controversial elections approach, economic policy uncertainty (UPR) tends to increase, the researchers find. “Elections represent a key source of uncertainty that can affect the investment, spending, and hiring decisions of businesses and households,” they write.

Researchers studied UPE trends surrounding national elections in 23 countries and found that UPE increased in the months leading up to national elections, reaching a peak increase of 13%, on average, during the election month. himself. In the US presidential races, the fog was thickest in November, when the UPR rose 18% from its average value during the same election cycle. To measure UPE in countries around the world, the researchers counted the frequency of newspaper articles discussing the economy, political issues and uncertainty.