PRIMARY SEASON BOOSTS STATE ECONOMIES: Evidence from US presidential campaigns from 1974 to 2008
19 Dec 2016
US presidential campaigns may be long and drawn out, but according to research by Rebecca Lessem and Carly Urban, they can bring considerable economic benefits to the states hosting primary elections.
Their study, published in the Economic Journal, finds that the increased spending in a state around a primary increases total per capita earnings in that quarter by 25% – and by more in accommodation and the retail sector. What''s more, a multiplier effect means that one more dollar in campaign spending results in between 1.2 and 1.4 more dollars in the state economy.
These results suggest that when people in a state are greeted with a political campaign, they should relish the local stimulus that this provides – and the campaign contributions transferred from people in other states who allow this to occur. Similarly, policy-makers, who continually discuss the re-ordering of state primaries, should consider the local economic growth benefits when making these decisions.
The researchers note that Americans often complain that political campaigns dominate the news and congest their local areas. States with early elections in the presidential primaries are typically perceived as having a disproportionate influence on the outcome of the election. But what if there is a silver lining in hosting the spectacle of a campaign? Can campaigns actually provide spillover benefits to people in the state?
This study examines a potential gain from hosting a primary election, which comes through economic benefits from campaign spending. In 2008 alone, US presidential campaigns spent $348 million across states on hotels, meals, rental cars and other campaign expenditures. This figure does not include the amount spent by media covering the race, personal in-state expenses of staffers or additional funds that people spend when coming to witness the spectacle of a campaign.
The authors study the effect of primary election spending by comparing state-level earnings in years when states did and did not receive primary election spending. This varies across years due to the nature of primary elections. Candidates typically campaign in early primary states first, and wait to allocate resources in each state until their primary date is near.
Furthermore, across election cycles, primary elections vary in duration. For example, in 2008, the Democratic primary season extended into June, while in 2012, all primary elections were completed by early May.
This means that many states received campaign spending in 2008 but not in 2012. In addition, states often change their primary date: if a state moves up in the election season (closer to January), the campaign is more likely to reach the given state, and if it moves back (closer to July), it is less likely to see any campaign activity.
The researchers compare total earnings in years in which states were reached by campaigns to those in which the same states were not reached, as well as across states reached and not reached in primary campaigns between 1974 and 2008. While it is unclear whether campaign spending will affect overall income, sectors like accommodations, services and retail are more likely to be affected by primaries.
The study finds that hosting a primary increases total per capita earnings in that quarter by 25%. This effect is slightly larger in the service sector, where a primary campaign increases a state''s per capita quarterly income by 26.5%. The largest effect is in the retail sector, which sees a 27% increase in income.
For the 2004 and 2008 election cycles, the authors find that a 10% increase in campaign spending results in a 0.9% increase in per capita income. This effect is slightly larger in accommodation (1.1%) and the retail sector (1.6%). This results in a multiplier effect, where people earning more money in these sectors circulate the money back into the economy. One more dollar in campaign spending results in 1.2-1.4 more dollars in the state economy.
''Local Economic Gains from Primary Election Spending'' by Rebecca Lessem and Carly Urban is published in the November 2016 issue of the Economic Journal. Rebecca Lessem is at Carnegie Mellon University. Carly Urban is at Montana State University.
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