Reversing the Causal Arrow: The Political Conditioning of Economic Perceptions in the 2000–2004 U.S. Presidential Election Cycle

Many economic voting models assume that individual voters’ reactions to incumbents are strongly conditioned by their perceptions of the performance of the macroeconomy. However, the direction of causality between economic perceptions and political preferences is unclear: economic perceptions can be a consequence of incumbent support rather than an influence on it. We develop the latter thesis by examining the dynamic relationship between retrospective economic perceptions and several measures of political preferences—approval, partisanship, and vote—in the 2000–2004 U.S. presidential election cycle using the ANES 2000-2002-2004 panel study to estimate structural equation model extensions of the Anderson and Hsiao estimator for panel data. Our findings confirm that the conventional wisdom misrepresents the relationship between retrospective economic perceptions and incumbent partisanship: economic perceptions are consistently and robustly conditioned by political preferences. Individuals’ economic perceptions are influenced by their political preferences rather than vice versa.