It's the economy, stupid! How economic conditions shape election results

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

In Poland, governments have won elections when voters’ real incomes were rising – and lost when they stagnated or fell. Politicians know this all too well, which is why the government is postponing efforts to rein in its record deficit until after the 2027 election. The bill will come due in 2029–2030, when whoever is in power will have to find savings equivalent to around 3% of GDP.

“It’s the economy, stupid!” was the famous mantra behind Bill Clinton’s successful 1992 US presidential campaign, which shifted the political debate towards issues affecting voters’ wallets. Analysts and commentators broadly agree that election outcomes depend on many factors, but economic conditions almost always play an important role.

With Poland’s next parliamentary election just a year away, we decided to examine which economic factors have mattered most in previous elections. We also analyzed how the current economic situation could influence the outcome of the 2027 vote.

Which factors matter most?

Research identifies several factors that have historically had a significant impact on election results around the world. The most important is changes in real incomes – wages, pensions and other benefits adjusted for inflation. In Douglas Hibbs’s classic model, Bread and Peace Voting in U.S. Presidential Elections, the outcome of US presidential elections is explained almost entirely by changes in real disposable income over the presidential term. None of the more than 20 alternative model specifications tested improved on this result.

A similar pattern can be observed in Poland over the past several election cycles, as the chart illustrates. It shows changes in households’ real disposable income.

When incomes grew substantially throughout most of a parliamentary term, the governing party tended to win the next election. This was the case in 2011, when income growth slowed only shortly before the vote. The governing Civic Platform–Polish People's Party (PO–PSL) coalition retained power. The same happened in 2019, when real incomes rose rapidly throughout the parliamentary term, helping the United Right coalition retain its outright majority in the Sejm, Poland’s lower house of parliament.

Conversely, governments tended to lose when income growth remained weak for much of their term. This was the pattern before the 2015 election. Between 2011 and 2013, real income growth hovered around 1%, recovering strongly only shortly before the vote. A similar situation occurred ahead of the 2023 election, when real wages were falling. The subsequent recovery just before the election was not enough to help the incumbents retain power.

GDP, inflation and unemployment

The second factor identified in the research is inflation. The faster prices rise, the less support governing parties tend to receive – a correlation well documented in the literature, including a 2000 study by Chappell and Veiga. An experimental study by Aytaç, McDowell and Steinberg (2025) shows that voters remember cumulative price increases. Other research suggests that voters judge governments particularly harshly when inflation comes as a surprise (Palmer and Whitten, 1999).

When analyzing the data, it is worth remembering that inflation is already reflected in real wage figures. Nevertheless, it seems plausible that the surge in prices in Poland between 2021 and 2023 contributed to declining support for the government at the time. In other elections, inflation appears to have played a relatively minor role, as it remained low.

The third factor is changes in unemployment. In Poland, however, its influence seems to have been marginal in recent years. This is partly because unemployment has remained very low for the past decade, with relatively little fluctuation. Earlier, even a three-percentage-point increase in the registered unemployment rate between 2008 and 2011 failed to prevent the government from retaining power.

The fourth factor is GDP growth. The stronger the economy grows, the easier it should be for an incumbent government to remain in office, although this relationship has the weakest support in the academic literature. Voters appear to care more about their own finances than the overall state of the economy.

Nevertheless, a certain pattern is visible in Poland. Cumulative GDP growth during parliamentary terms that ended in electoral defeat was considerably lower than during terms after which the governing party retained power.

It is not just the average that matters

So far, we have discussed two effects identified in the research: voters’ attention to economic conditions immediately before an election and their assessment of cumulative economic performance. A paper by Z. Shen and co-authors, Economic Voting Behavior: The Peak-End Growth Rule, argues that peak economic growth also matters. In other words, voters remember the strongest period of growth during a government’s entire term, rather than simply its average performance.

Recent research also suggests that political polarization weakens the influence of economic conditions on voting behavior. Voters become more loyal to their preferred parties, even when macroeconomic conditions turn against them.

Does cutting the deficit mean losing an election?

Contrary to what intuition might suggest, economic research long failed to provide conclusive evidence that reducing budget deficits increased the risk of losing power. In a 2013 study, Alberto Alesina and his co-authors found that governments implementing fiscal consolidation did not systematically lose elections more often than other governments.

More recent research, however, challenges this relatively optimistic conclusion. Using survey experiments conducted in five European countries, Evelyne Hübscher and her co-authors showed that voters react negatively to announcements of fiscal consolidation, particularly when it involves cuts to public spending.

In a subsequent study, they found that austerity policies increase voter abstention and support for parties outside the political mainstream. Meanwhile, more recent work by Alesina and his co-authors demonstrated that the political costs of fiscal consolidation depend both on the instruments used and on the governing party’s political platform. Tax increases are particularly costly for free-market parties, while spending cuts can benefit parties advocating a smaller role for the state.

How substantial can these costs be? According to estimates by Alesina and his co-authors, a tax increase equivalent to 1% of GDP is associated with a roughly 7% decline in support for the governing party. This means that a party polling at 40% could lose almost three percentage points, with its support falling to 37.2%.

This is, of course, an average effect. The actual consequences depend on the circumstances in which the measures are introduced and the country concerned. Moreover, declining support does not automatically mean losing power. In some elections, a difference of a few percentage points may matter little; in others, it can determine whether a government retains its parliamentary majority.

The closer the election, the harder it is to cut spending

The electoral calendar influences not only the political consequences of fiscal consolidation but also the likelihood that governments will undertake it in the first place. Hübscher and T. Sattler (2017) showed that governments with a narrow electoral lead become markedly less willing to pursue fiscal consolidation as the next election approaches.

The estimated probability of implementing such measures falls from 40% at the beginning of a government's term to just 13% towards its end. No comparable relationship was observed among governments with a substantial electoral lead. These findings suggest that fear of losing power can encourage politicians to postpone unpopular budgetary decisions.

The right-hand side of the chart helps explain why Poland is not expected to reduce its deficit either this year or next. The government is clearly reluctant to tighten fiscal policy in an election year. Poland's deficit is projected to rise from 5.2% of GDP in 2023 to 7.1% in 2027.

Several factors have contributed to the deterioration of public finances: election campaign promises, including the increase in the 500+ child benefit to 800+; military spending; substantial pension and disability benefit increases linked to the high inflation of 2023; and rising healthcare expenditure.

The government has also introduced new programmes, including the babciowe childcare benefit, additional support for widowed pensioners, higher funeral benefits and temporary exemptions from social insurance contributions for entrepreneurs. It also approved substantial pay increases in 2024 for public-sector employees (20%) and teachers (more than 30%). Revenues increased mainly because income tax thresholds were frozen, but grew more slowly than receipts.

Why is Donald Tusk's government postponing deficit reduction?

Why, then, was fiscal consolidation not undertaken at the beginning of the parliamentary term? We believe there are two reasons.

First, Prime Minister Donald Tusk appears to remain haunted by the experience of 2011–2015. During that period, Poland tightened fiscal policy under the EU's Excessive Deficit Procedure, including a supposedly temporary increase in VAT to 23%. For many Poles, however, the period is more closely associated with then-Finance Minister Jacek Rostowski's words: “There is no money, and there won't be any.” These policies may have contributed to Law and Justice's electoral victories in 2015.

Second, the election promises were exceptionally generous. Both parties that received the most votes in the 2023 election supported increasing the 500+ child benefit to 800+. Moreover, Civic Coalition (KO), alongside the programmes described above, proposed raising the annual tax-free income allowance to PLN 60,000. After taking office, however, it abandoned the proposal because of its fiscal cost, estimated at 1.3% of GDP.

Failing to deliver on this promise may also have discouraged proposals to raise revenue, such as introducing a defense tax. Crucially, the government's ability to reduce spending was also constrained by its commitment to maintaining existing social transfers unchanged.

From a legal perspective, the government has not been required to tighten fiscal policy because of the national escape clause from EU fiscal rules linked to defense spending.

Painful austerity awaits Poland after the election

According to the latest public debt management strategy, Poland faces a substantial reduction in its budget deficit. Between 2029 and 2030, the deficit is expected to shrink by a total of 2.6 percentage points of GDP. As debt-servicing costs will rise at the same time, the government will have to cut other spending and/or raise taxes by an amount equivalent to around 3% of GDP.

This represents an exceptionally large fiscal tightening over just two years, which could significantly slow the economy. Poland's Ministry of Finance expects GDP growth of only around 2% annually in 2029–2030.

That is why, in our view, responsible political parties should present concrete plans for reducing the deficit during the upcoming election campaign. Voters should know which expenditures parties intend to cut, which taxes they plan to raise and what the economic consequences of those decisions might be.

Voters judge governments primarily by the state of their own finances. Research identifies changes in real incomes as the most important factor influencing election results, followed by inflation, unemployment and GDP growth. In Poland, governing parties retained power when incomes rose throughout most of their term (2011 and 2019), but lost when incomes stagnated or declined for extended periods (2015 and 2023).
Budget cuts carry an electoral cost, encouraging governments to postpone them until after elections. Recent research shows that voters punish governing parties for fiscal consolidation. A tax increase equivalent to 1% of GDP reduces support for the incumbent party by an average of around 7%. Politically vulnerable governments are considerably less likely to tighten fiscal policy ahead of elections. Poland illustrates this pattern, with its deficit rising from 5.2% of GDP in 2023 to a projected 7.1% in 2027.
Poland faces painful fiscal tightening after the 2027 election. According to the public debt management strategy, the deficit is expected to fall by 2.6 percentage points of GDP in 2029–2030, requiring spending cuts or tax increases equivalent to around 3% of GDP. Political parties should therefore present voters with concrete deficit-reduction plans during the election campaign.