Are Voters Rational? Evidence from Gubernatorial Elections

Standard agency theory suggests that rational voters will vote to re-elect politicians who deliver favorable outcomes. A second implication is that rational voters will not support a politician because of good outcomes unrelated to the politician’s actions. Specifically, rational voters should try to filter signal from noise, both in order to avoid electing incompetent, but lucky politicians, and to maximize the link between their votes and optimal incentives. This paper provides insight into the information processing capacities of voters, by measuring the extent to which they irrationally reward state governors for economic fluctuations that are plausibly unrelated to gubernatorial actions. Simple tests of relative performance evaluation reveal that voters evaluate their state’s economic performance relative to the national economy. However, these tests only provide evidence of rule-of-thumb performance filtering. More sophisticated tests reveal that voters in oil-producing states tend to re-elect incumbent governors during oil price rises, and vote them out of office when the oil price drops. Similarly, voters in procyclical states are consistently fooled into re-electing incumbents during national booms, only to dump them during national recessions. Consistent with an emerging behavioral literature, this suggests that voters make systematic attribution errors and are best characterized as quasi-rational. First Draft: April 19, 2000 This Draft: March 19, 2002 Thanks for guidance and data are due to: Alberto Alesina, James Alt, Olivier Blanchard, Robert Barro, Anne Case, Alan Durell, Chris Foote, Ed Glaeser, Christopher Jencks, Larry Katz, Michael Knetter, David Laibson, Jeff Liebman, Greg Mankiw, Andrew Oswald, Sam Peltzman, Betsey Stevenson, and James Williams. Thanks also to members of the Harvard Labor and Macro workshops, the KSG Wiener Center social policy lunch, the MIT Macro workshop, and seminar participants at LSE, Princeton, NYU economics departments and Stanford, Columbia, Chicago, and Harvard business schools.