Pain at the Pump, Pain at the Polls? Global Evidence on Election Timing, State Capacity, and Gasoline Prices

Abstract

Why do environmentally and economically costly fossil fuel subsidies persist? One explanation may be election timing, since rising gasoline prices can harm a leader’s reelection prospects. Drawing on theories of retrospective economic voting, I argue that incumbents reduce the risk of electoral backlash by controlling gasoline prices as an election nears, especially when they cannot offset rising prices with more comprehensive social assistance policies. I evaluate this argument using monthly gasoline price data from 1990 to 2015 for more than 90 democracies. I find that when incumbents are uncertain about their electoral prospects, the impact of a pending election on gasoline prices is negative in democracies with low state capacity, and the effect is economically meaningful in terms of reduced per-liter cost. The findings contribute to our understanding of the political determinants of fossil fuel subsidies, opportunistic business cycles, and the political and distributional challenges of adopting effective climate policy.