Addressing the endogeneity problem

One of the major limitations of economic voting studies is the problem of potential endogeneity (see section 2.2.3). Critics claim that contrary to the logic of economic voting, the causal relationship between economic assessments and political support may be actually reverse in direction. Citizens’ economic

per-ceptions may be biased by their party attachment: incumbent government sup-porters may view the economy in a more favourable light and be selective in attributing responsibility, whereas opposition loyalists tend to evaluate the eco-nomic situation and government performance more negatively. In other words, people can ignore objective economic conditions and adjust their evaluations in line with their partisanship, or adjust who they think is responsible for economic conditions according to whether these conditions are good or bad, based on their partisanship (Tilley and Hobolt 2011). Consequently, the estimated impact of economic perceptions on vote choice may be spurious and economic effects in previous academic studies may be overstated (see Wlezien, Franklin, and Twiggs 1997; Evans and Andersen 2006; Anderson 2007).

The stability and robustness of economic effects demonstrated in the analy-sis thus far suggests that the economy is a valid predictor of incumbent support.

However, in order to properly address the endogeneity concerns, additional tests are necessary. Unfortunately, it is difficult to tackle the endogeneity issue with regression analysis based on individual-level cross-sectional data because causal relationships cannot truly be estimated with data from a single timepoint.

For to cause , must occur prior to in time, but surveys measure variables at the same moment (Lewis-Beck, Nadeau, and Elias 2008). To disentangle the complex temporal relations between economic perceptions and political sup-port, a number of works utilise longitudinal panel data, which enable research-ers to measure partisanship at an earlier point in time (see Andresearch-erson, Mendes, and Tverdova 2004; Evans and Andersen 2006; Lewis-Beck, Nadeau, and Elias 2008; Fraile and Lewis-Beck 2014), or, occasionally, experimental survey data, which allows us to make proper causal inferences (see Wilcox and Wlezien 1993; Tilley and Hobolt 2011). Another way to address the endogeneity prob-lem is to exogenise the economic predictor using instrumental variables (see Lewis-Beck, Nadeau, and Elias 2008; Nadeau, Lewis-Beck, and Bélanger 2013;

Fraile and Lewis-Beck 2014). The latter are constructed using variables from outside the explanatory equation, which are not caused by vote preference and are not correlated with error terms in the model, a frequent concern with panel data. However, since none of these approaches is without its own problems, the debate on endogeneity remains inconclusive. Studies provide support for both proponent and revisionist arguments of economic voting, meaning that the jury is still out on whether economic evaluations shape partisan support or vice versa.

They also suggest the need to examine the temporal interconnections between partisanship and economic perceptions, something that is simply not possible without extensive longitudinal data.

The use of cross-sectional survey data in the present study limits the ability to fully assess the causal direction between subjective economic perceptions and party support. That said, one way to see whether responsibility attribution is influenced by party attachment is to investigate whether economic effects also hold among voters who do not identify with the governing party (for a similar approach, see Bélanger and Nadeau 2012). Economic opinions of the latter are

not coloured by being incumbent partisan and should thus provide us with un-biased results. To do so, I replicate the previous analysis in three separate sub-samples, indicating voter attachment to the incumbent PM party. If the results are robust, we should witness significant economic effects on vote intention in all three groups. Party loyalty can be measured in various ways, for instance with party identification (asking respondents which party they feel close to), or with previous vote choice (asking which party they voted for in preceding gen-eral elections). Regrettably, data on party identification are missing in the EES Voter study for 1994, leaving us with the second approach. I define PM-parti-sans as respondents who in the preceding national election voted for the party of the Prime Minister in office during the conducting of the survey fieldwork (26%), and non-PM-partisans as those who voted for any other party (44.6%).

29.4% of the respondents fall into the category for whom details of their past vote choice is missing.

Table 7 below displays the predictions of incumbent vote depending on subjective economic perceptions, holding all other variables at their means. We witness that results are indeed partly influenced by party loyalty. Average mar-ginal effects for PM-partisans (Model 1) indicate that compared to people who believed that the economy had not changed over the preceding year, the proba-bility of an incumbent vote is 8 percentage points lower for those who thought the condition of the economy had worsened and 4 percentage points higher for those who said that it had improved. For non-partisans (Model 2), the results are -1 percentage point and 1 percentage point respectively, indicating that eco-nomic effects are less pronounced among these respondents. Nonetheless, the overall vote distribution is similar in both groups, telling us that the economy has a firmly significant impact on vote choice in the non-partisan subsample as well. Evaluations that rate economic conditions more positively lead to higher probability of voting for incumbent PM party, even if the vote in previous elec-tions was given to some other party. Moreover, the economic coefficient is statistically significant also among citizens whose response to the past vote question was missing: those who did not cast a vote, voted blank, refused to answer the question, etc. (Model 3). Even in this subsample, positive economic evaluations considerably increase and negative evaluations decrease the likeli-hood of an incumbent vote. These results suggest that although partisan atti-tudes seem to play a role in shaping economic perceptions, there is still solid evidence for the presence of retrospective economic voting in all voter groups.

Table 7. Effects of economic evaluations on incumbent support by party attachment. Economic evaluations: same ref. category ref. category ref. category Economic evaluations: worse -0.08***

(0.01) -0.01***

(0.00) -0.04**

(0.02) Economic evaluations: better 0.04***

(0.01) 0.01** Cabinet time in office logged -0.17***

(0.06)

Source: EES Voter study from 1989, 1994, 2004, 2009 and 2014 for 10 European countries; author’s own calculations.

Notes: Entries are average marginal effects, standard errors in parentheses. The dependent variable is 1 if vote intention is for the incumbent PM party and 0 for any other party. Don’t knows, refusals, respondents who said they would vote blank, would spoil their vote or would not vote, and missing answers are excluded. Left-right placement, class and religiosity are adjusted for the PM party’s ideology. All control variables are recoded on a 0 to 1 scale. Country and year dummies are not shown. Standard errors clustered by survey (each country in each year).

***p<0.01 **p<0.05 *p<0.1