Andrew Leigh and compatriot Mark McLeish have released a new paper titled “Are State Elections Affected by the National Economy? Evidence from Australia.” which is definitely worth a read. The media release states:
“State and territory governments tend to be unfairly rewarded and punished for the condition of the global economy, according to research from The Australian National University released today that looked at the results of state elections from 1916 to 2006.
The study, conducted by ANU economist Dr Andrew Leigh and Mr Mark McLeish, found that voters tended to blame state governments for conditions that were outside their control.
“We are the first to show that economic conditions affect the outcomes of Australian state elections,” said Mr McLeish. “But what is most striking is that voters do not tend to filter out the performance of the national economy when deciding whether or not to re-elect a state government.”
“Voters are not entirely irrational. If a state outperforms the national economy, its government is more likely to be re-elected.
“But when the Australian economy booms, all state governments are more likely to be re-elected – even although they probably can’t take much credit for the boom. Indeed, when the United States economy does well, Australian state governments are more likely to be re-elected.”
“Our results are consistent with what psychologists call ‘fundamental attribution error’, said Dr Leigh. “Just as CEOs tend to be overpaid when the whole sharemarket booms, Australian voters mistakenly reward state governments when the national economy booms.
“We can see this pattern over the past two decades. The Australian unemployment rate reached nearly 12 percent in early-1993. During the period 1992-1995, six of the eight states and territories ousted their government.
“During 2003-2006, Australia’s unemployment rate averaged 5 percent. In these years, no state or territory government was ousted from power.”
The authors find that the effect of the national economy on state elections is about the same magnitude as the effect of outperforming the national economy. They estimate that a 5% rise in the national unemployment rate lowers all state governments’ chances of re-election by 20%. Similarly, a state whose unemployment rate rises by 5% more than the national average reduces its chances of staying in office by 20%.”
I’m still making my way through it, but it looks pretty good as of page 13 
The weekly Intrade update has been done which you can see over at the US Election page, and while the Party and State markets have behaved as one would expect considering the polling surge and Obama’s on the ground organisation powering into the final stretch, the Contender markets at Intrade have had a few silly buggers trying to manipulate the McCain and Obama prices this week:
Pollster.com has a good article on the history of national tracking polls in US Elections, and a regular at the old Possum Box bit the bullet and started up his own blog called The Political Sword which is worth a thoughtful look.
Another Essential Report poll out later today, Newspoll Tuesday tomorrow (or tonight for the truley tragic) and we’ll have some more evidence to see if Turnbull’s polling bounce was the shortest in living memory - which is what last week’s polls strongly suggested.
