The Business Cycle and the Entry of Third-Party Candidates in the US State-Level Elections

This study offers a new explanation for the entry of third-party and independent candidates into the US state-level elections. We argue that the economic benefits of holding an office is what motivates amateur politicians to run, predicting that amateur politicians find holding an elected office particularly attractive when the private sector is struggling. This is because, during the recession, amateur politicians view that an elected office is a more attractive source of income as compared to private jobs, while pursuing political power to change the economic prospect by adopting a new policy. Building on this argument, we hypothesize that as the unemployment rate increases, the number of third-party and independent candidates increases. Our analysis with panel data of state house, state senate, and gubernatorial elections in 48 US states between 1980 and 2010 reveals that the hypothesized relationship existed only for state legislative elections. To explain why these candidates run, despite their very small probability of winning, we extend the prospect theory to suggest that these candidates may overestimate their probability of winning.