Relative economic performance and the incumbent vote: a reference point theory

Abstract

How can voters make sense of economic outcomes they observe when deciding whether to reelect the incumbent? I propose a reference point theory of economic voting that emphasizes voters' need for reference points when evaluating incumbents' performance. Consideration of economic outcomes during the incumbent's term relative to recent past outcomes in the country and in a cross-national perspective provides two such reference points, enabling a better assessment of incumbent competence. Analyses of 475 elections in 62 countries over 40 years provide evidence for my theory. Incumbents who preside over relatively better (worse) economic outcomes in domestic and international contexts are rewarded (punished) at the polls, regardless of election-year performance. I also show that cross-national benchmarking is not a universal phenomenon and identify the conditions that are positively associated with the electoral salience of relative international performance. My theory and accompanying evidence highlight that economic voting is driven by incumbents' relative performance.