The Economic Vote in New Zealand an Analysis of How Macroeconomic Conditions and Perceptions of the Economy Affect Voter Behaviour

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The Economic Vote in New Zealand an Analysis of How Macroeconomic Conditions and Perceptions of the Economy Affect Voter Behaviour The Economic Vote in New Zealand An analysis of how macroeconomic conditions and perceptions of the economy affect voter behaviour Luke Gardener Abstract A large body of research suggests the performance of the economy has a significant effect on voter behaviour. However, there has been limited analysis of this issue in relation to New Zealand. This thesis seeks to correct this gap in the literature. It provides a review of the theoretical support for economic voting theory and discusses three key methods of analysis: vote functions, popularity functions, and the individual-level study. It undertakes a macro-popularity function analysis to determine the effect of impartial macroeconomic conditions on voter behaviour in New Zealand between 1978 and 2015. This is followed by a micro-individual analysis that determines the effect perceptions of the economy have on voter behaviour in New Zealand between 2002 and 2014. It finds the evidence to support economic voting in New Zealand is mixed. The macro-analysis suggests macroeconomic conditions have a minimal to moderate effect on voter behaviour. The micro- analysis finds perceptions of the economy have a stronger effect, but that partisanship is a far more important indicator of vote choice. i Acknowledgments There are many people that helped me complete this thesis; far too many to list on a single page. However, there are a number of people that provided significant support I would like to name individually. David Farrar. David very generously shared with me a compiled database of Heylen Research Centre and Colmar Brunton polls. Without this, the time period I would have been able to examine would have been reduced significantly. Professor Jack Vowles. For pointing me in the direction of David Farrar and his polling repository. Tim Jowett, statistical consultant in the Department of Mathematics and Statistics at Otago. I’m not sure Tim realised what he was getting into when he agreed to help an arts student who had, up until this point, avoided statistics like the plague. Without Tim this project would not have been possible. Of course, any errors or problems with the modelling are my own. Dr Austin Gee. For providing humorous anecdotes over the five years I have spent studying at Otago and for proof reading my thesis. Though again, any errors are of course my own. Dr Chris Rudd. Chris has supervised me over the course of this project. I have enjoyed his dry sense of humour immensely. His ability to keep a straight face when I gave him a deadline for a chapter despite having met none of my other deadlines was impressive and appreciated. Dunedin. I’ll miss Dunedin’s crisp clear winter days and long summer evenings. I’ll miss its proximity to the mountains of Fiordland and Mount Aspiring National Parks. I’ll miss its rock climbing crags, mountain biking trails and surfing beaches which have all distracted me and rejuvenated me when I have been drowning in statistical models. My family at Stoney Knowe. For their support this year, and every year. Lastly, this thesis is for Mae Gardener who died on the 4th of October 2016, aged 90. She constantly annoyed me over the last year with questions of “how many words have you written today?” She would no doubt of appreciated the irony of having a piece of work she thought was incredibly dull dedicated to her. ii Table of contents Abstract .................................................................................................................................................... i Acknowledgments ................................................................................................................................... ii List of tables ........................................................................................................................................... vi List of figures .......................................................................................................................................... xi List of abbreviations .............................................................................................................................. xii Introduction: ........................................................................................................................................... 1 Chapter 1: Voting and the economy An overview of the economic vote literature .................... 2 An economic model ............................................................................................................................ 2 Prospective/selection model .............................................................................................................. 3 Retrospective voting, or a sanctioning model .................................................................................... 4 Empirical findings ................................................................................................................................ 7 Vote functions ..................................................................................................................................... 7 Popularity functions .......................................................................................................................... 12 Conflicting results in vote and popularity functions ......................................................................... 16 Individual-level/micro-studies .......................................................................................................... 20 Individual-level studies in New Zealand ........................................................................................... 24 Conclusion ......................................................................................................................................... 27 Chapter 2: Methodology, macro-level study ........................................................................................ 28 The dependent variable .................................................................................................................... 28 The independent variables ............................................................................................................... 29 How each independent variable was measured ........................................................................... 31 Left versus right differentiation ........................................................................................................ 32 Testing under coalition government ................................................................................................. 33 Lagged data ....................................................................................................................................... 34 Bust is bad, but boom is not particularly good ................................................................................. 34 What is not included in the model .................................................................................................... 34 Partisanship ................................................................................................................................... 34 Political variables .......................................................................................................................... 34 Cyclical relationships ..................................................................................................................... 36 The model ......................................................................................................................................... 36 Chapter 3: Macro-level results .............................................................................................................. 37 Non-lagged inflation and unemployment ......................................................................................... 38 Non-lagged inflation and unemployment; interactions omitted ..................................................... 39 iii Non-lagged inflation, unemployment, and real income ................................................................... 40 Non-lagged inflation, unemployment, and real income; interactions omitted................................ 42 Three-month lag, inflation and unemployment ............................................................................... 43 Three-month lag, inflation and unemployment; interactions omitted ............................................ 44 Three-month lag, inflation, unemployment, and real income ......................................................... 45 Three-month lag, inflation, unemployment, and real income; interactions omitted ...................... 47 Six-month lag, inflation and unemployment .................................................................................... 48 Six-month lag, inflation and unemployment; interactions omitted ................................................. 49 Six-month lag, inflation, unemployment, and real income .............................................................. 50 Six-month lag, inflation, unemployment, and real income; interactions omitted ........................... 52 Nine-month lag, inflation and unemployment ................................................................................. 53 Nine-month lag, inflation and unemployment; interactions omitted .............................................. 54 Nine-month lag, inflation, unemployment, and real income ..........................................................
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