Ideological Change and the Economics of Voting Behavior in the US, 1920-2008

This paper tests the proposition that voters advance a more liberal agenda in prosperous times and shift towards being more conservative in dire economic times. A reference-dependent utility model links income growth to voting behavior by way of the demand for public goods and the optimal tax rate. With income growth, the relative demand for public goods increases and the median voter can afford more taxation, as a result the median voter is more likely to vote Democrat. With less income growth, the median voter derives increased marginal utility from personal income - making taxation more painful - and is more likely to vote Republican. The effects suggested by the income growth model are different from the effects suggested by the standard redistributive model, but the logic of both models may be operating in parallel. Ordinary and instrumented statistical analyses of a new time series for the US median voter are encouraging of the income growth model. This work links voting behavior to economic business cycles and shows that ideological change is endogenous to income growth rates