Research / BFI Working PaperOct 28, 2020

Political Polarization and Expected Economic Outcomes

Olivier Coibion, Yuriy Gorodnichenko, Michael Weber

We use a large-scale representative survey of households from October 19-21 that elicits respondents’ expectations about the presidential election’s outcome as well as their economic expectations to document several new facts. First, people disagree strongly about the likely outcome of the election, despite widespread publicly available polling information. Most Democrats are very confident in a Biden win while most Republicans are very confident in a Trump win. Second, respondents predict a fairly rosy economic scenario if their preferred candidate wins but a dire one if the other candidate wins. Since most respondents are confident in their favored outcome, unconditional forecasts are similar across parties despite the fact that underlying probability distributions and conditional forecasts are very different. Third, when presented with recent polling data, most voters change their views by little unless they are independent and/or have relatively weak priors about the outcome. Information that emphasizes the uncertainty in polling data has larger effects in terms of reducing polarization in expected probabilities over different electoral outcomes. Fourth, exogenous information that changes individuals’ probability distribution over electoral outcomes also changes their unconditional forecasts in a corresponding manner. These changes in economic expectations in turn are likely to affect household economic decisions.

Additional Materials

More Research From These Scholars

BFI Working Paper Dec 4, 2019

Perceived Precautionary Savings Motives: Evidence from FinTech

Francesco D'Acunto, Thomas Rauter, Christoph Scheuch, Michael Weber
Topics:  Fiscal Studies
BFI Working Paper Dec 14, 2020

Cybersecurity Risk

Chris Florakis, Christodoulos Louca, Roni Michaely, Michael Weber
Topics:  Technology & Innovation
BFI Working Paper Aug 1, 2016

The Effect of Unconventional Fiscal Policy on Consumption Expenditure

Michael Weber, Daniel Hoang, Francesco D'Acunto
Topics:  Fiscal Studies