Beyond Policy: Partisan Differences in Inflation Expectations

• In Event: Party Ideology and the Economy

Abstract

Affective polarization can profoundly impact policy evaluations, as individuals who experience intense negative emotions towards the opposite party often view issues through a partisan lens and ideological biases, leading to inconsistent policy positions. Building on Bordalo et al. (2016), we present a model of stereotypical thinking as the source of the formation of partisan biases in inflation expectations, a critical economic indicator. Our empirical strategy -- a choice experiment embedded in a representative survey of US residents conducted in August 2022 -- improves our understanding of the interactions between partisan perceptions and economic expectations. Besides macro policy factors, political ideology emerges as a critical determinant in framing expected inflation levels. These findings highlight the importance of acknowledging the impact of political biases in economic forecasting and policy evaluations, emphasizing the need for comprehensive strategies to account for these biases in macroeconomic policy considerations.

Authors

• Gail Buttorff, University of Houston

• Pablo Martin Pinto, University Houston

• Agustin Vallejo, University of Houston

• Sameer Malik, University of Houston

• Man Chiu Wong