Local Economic Gains from Primary Election Spending

Abstract

This paper asks how government and private consumption spending affect earnings in service sectors. To do this, we exploit the variation across states and time in the money spent while campaigning for a party’s Presidential primary nomination. We create a novel dataset combining the date each state held its primary from 1976-2008, the date in each election cycle in which only one candidate remained, and quarterly state earnings by sector. Using an instrumental variable strategy, we find that hosting a primary election increases earnings, particularly in the retail and accommodations sectors. These results remain consistent when using data on primary campaign expenditures across states in the 2004 and 2008 elections. JEL codes: D7, P0, H0 ∗The authors acknowledge helpful comments from Amit Gandhi, Ken Goldstein, Andrew Reschovsky, John Karl Scholz, Alan Sorenson, and Chris Taber. All remaining errors are our own. †rlessem@andrew.cmu.edu, Tepper School of Business, Carnegie Mellon University, 5000 Forbes Ave, Pittsburgh PA 15213 ‡carly.urban@montana.edu, Department of Agricultural Economics & Economics, Montana State University, P.O. Box 172920 Bozeman, MT 59717