All Economics is Local: Spatial Aggregations of Economic Information

Abstract

National economic indicators play a foundational role in political economic research, particularly in regards to electoral politics. Yet, scholars have failed to recognize that national economic indicators are simply aggregations of local economic information, and the manner in which they are aggregated may not be consistent with the process voters use to acquire, access, and incorporate economic information. We argue that the economic similarities among localities, and the way in which the media report on these similarities, provide more theoretically satisfying means of specifying how local information aggregates into an overall portrait of the national economy. We introduce a novel estimation procedure called the spatial-X ordered logit that offers the chance to model how voters’ evaluations respond to changes in contextualized economic information. Our results support our theory that voters incorporate economic information from other localities with similarly structured economies and in ways that are shaped by media messages. Furthermore, these two specifications offer greater explanatory power than national indicators and other geographical means of aggregating economic information. We conclude by offering a number of implications for research questions ranging from electoral accountability to spatial diffusion processes.