Who Benefits from Short-Time Work? the Effect of Labour Market Policy on Electoral Behaviour

The literature on political economy and voting behavior argues that voters are myopic and judge policymakers above all based on recent policy efforts and economic developments. This implies that policymakers pursue policies that instantly reward voter, in order to gain support in the next elections. In 2009, the federal government of Germany responded to the economic downturn with a massive increase in short-term work to avoid crisis related layoffs, which happened to occur in the eve of the 2009 national elections. Against this backdrop, the paper examines the impact of anti-crisis policies on the outcome of the German election. The paper analyses whether voters punished the incumbent parties for the worsened economic conditions – and rewarded them for increasing short-term work rates. To explore this relationship, the paper uses seemingly unrelated and multilevel regression analysis based on a combination of unique fine-grained macro data at the constituency level and individual data at the voter level, to analyze majoritarian and proportional vote, which are both part of the German electoral system. The results of the analyses show that higher short-term work came along with more votes for the incumbent parties, whereas they lost in case of increasing unemployment rates. Furthermore, the results of the analysis reveal also that especially left parties – the ruling SPD and the Linke, which was in the opposition – profited from higher short term work rates.