230 issn 1822 – 8402 european integration studies. 2009. no 3 THE IMpACT of THE SoCIo-ECoNoMIC fACToRS oN THE ELECToRAL BEHAVIouR IN YouNG Eu MEMBER STATES: pRoBLEM-poSING AND METHoDoLoGICAL AppRoACH. THE CASE of LATVIA AND ESToNIA Elīna Vikmane Ilga Kreituse Riga Stradiņš University Abstract In representative democracies elections are one of the mostly widely used conventional forms of political participation, whereas electoral activity is among the most important factors for development of a civic society particularly important for new Eu member states. The economic voting theory stresses that successful work of political parties in the government results in increase of economic indicators and overall growth of the state increases the level of well-being of its people, by also leaving a positive impact upon the eventual re-election chances. The most popular indicators for researching the impact of the economic situation upon the electoral choice are: GDp per capita, unemployment rate, price increase or the inflation rate. During the last years in scientific literature significant attention is paid to the analysis and forecasting of dynamic series of macroeconomic indices. Application of quantitative methods in political science is inhibited by the large amount of narrative information which is difficult to quantify for the further processing. Research has been carried out in relation to the Saeima elections in 1995, 1998, 2002 and 2006 in Latvia and elections of Riigikogu in 1995, 1999, 2003 and 2007 in Estonia. The economic voting trends have been determined by means of a time series model GARCH (p,q) (Generalized Auto Regressive Conditional Heteroskedasticity) using statistics on the number of votes given to parties which were represented in the previous coalition from the total number of votes given in Latvia and Estonia, the number of votes given to the opposition parties of the previous government, newly established parties and parties that have failed to obtain the required number of votes for entering the parliament in Latvia and Estonia, average inflation rate in the country, changes in the unemployment rate per year, GDp per capita, expressed as changes in real prices in uSD per year, changes in the average gross salary per year. Autocorrelation function ratio values have been used for more convenient data analysis. The research shows that the comparative analysis the analysis of dynamic series of macroeconomic index which characterize the economic process in question and causations of political behaviour can be successfully used. Although the socio-economic factors in the aggregate are to be considered a determinant of electoral choice and especially manifest such are in Estonia, thereby making conclude that the economic voting theory in this country coincides with the electoral practice, however in Latvia this can be observed only partially. Keywords: Elections, re-election, electoral activity, electoral choice, socio-economic factors. Introduction In representative democracies elections are one of the mostly widely used conventional forms of political participation, whereas electoral activity is among the most important factors for development of a civic society. Although it is not the sole indicator of existence of a civic society, it is deemed a material component of the social capital. It involves trust and legitimacy to the state power and its chosen political and economic path. The problem of electoral participation as one of the most widespread types of political participation in the world has been described by numerous authors. The decreasing electoral activity in the USA and the factors whereupon such decrease is based is among the issues that have been researched most (Campbell, Converse, Miller, Stokes, 1960; Alford, Lee, 1968; Barzel, Silberberg, 1973; Karnig, Walter, 1974; Blank, 1974; Silberman, Durden, 1975; Kim, 1975; Kau, Rubin, 1976; Settle, Abrams, 1976; Filer, 1977; Murray, Vedlitz, 1977; Crain, Deaton, 1977; Cebula, Murphy, 1980; Preuss, 1981; Caldeira, Patterson, 1982; Rosenstone, 1982; Patterson, Caldeira, 1983; Carter, 1984; Cebula, Murphy, 1984; Ostrosky, 1984; Conway, 1985; Foster, 1984; Gilliam, 1985; Tucker, 1986; Durden, Gaynor, 1987; Petrocik, 1987; Lehman, Schlozman, 1987; Cox, Munger, 1989; Bauer 1990; Davis, 1991; Jacobson, 1992; Hill, Leighley, ISSN 1822-8402 EUROPEAN INTEGRATION STUDIES. 2009. No 3 231 1993; Filer, 1993; Matsusaka, 1993; Merrifield, 1993; Ansolabehere, 1994; Jackson, 1997; Grofman, 1998; Franklin, Hirczy de Mino, 1998; Shachar, Nalebuff, 1999; Hogan, 1999; Janda, Berry, Goldman, 1999; Hill, Leighley, 1999, etc.). Similar interest has been devoted to the electoral participation in the European countries – both by comparing with each other and with other democracies (Seidle, Miller, 1976; Powell, 1980; Powell, 1986; Jackman, 1987; Blais, Carty, 1990; Crepaz, 1990; Colomer, 1991; Radcliff, 1992; Kaempfer, Lowenberg, 1993, Beetham, 1994; Jackman, Miller, 1995; Hoffman- Martinot, 1996; LeDuc, Niemi, Norris, 1996; Blais, Dobrzynska, 1998; Lijphart, 1999; Blais, 2000; Perea, 2000; Kraaykamp, 2001; Endersby, 2002; Siaroff, Merer, 2002; Mattila, 2002, etc.) by consequently explaining the obtained results. Separate European countries have been discussed less frequently (Rosenthal, Sen, 1973; Denver, Hands, 1974; Denver, Hands, 1985; Eagles, Erfle, 1989; Lutz, 1991; Kirchgässner, Schimmelpfennig, 1992; Denver, Halfacree, 1992; Hansen 1994; Hoffman- Martinot, 1994; Kirchgässner, Himmern, 1997; Pattie, Johnston, 1998; Allers , 2000; Kraaykamp, 2001; Geys, Heyndels, 2002; Søberg, Tangeras, 2003; Ashworth, 2004; Martiksinen, Martikainen, Wass, 2005, etc.) however, it does not mean that the importance thereof is less essential. The research of CEE countries has been launched comparatively recently (Przeworski, 1995; Bell, 1997; Bohrer II, Pacek, Radcliff, 2000; Colton, 2000; The World Bank Transition: The First Ten Years, 2002; Kostadinova, 2003; Racz, 2004, etc.). It concerns the electoral participation in CEE by mostly discussing the impact of the socialistic system on high/low voting activity in the restored democracies. Electoral participation is based upon long-term factors (affiliation to a particular social group, identification with a particular political party, values) and short-term factors (assessment of candidates, social and political events and especially –economic issues). Numerous researches indicate that in the course of time long term factors lose their relevance, whereas the impact of short term factors upon the electoral behaviour, economic voting particularly, is gaining ever increasing importance (Freire, Lobo, 2005). Considering above mentioned aspects the scientific problem of the article is whether theories of rational choice, economic voting and resources correspond to the behavior of the voters in CEE countries after the reestablishment of independence. The novelty of the research is analysis of the influence of the socio-economic factors on the electoral behavior and especially upon the re-election in Latvia and Estonia, sucessfully determining the economic voting trends by means of a time series model. The object of research is the influence of socio- economic factors on the activity and choice of voters in parliament elections. The aim of the article is to highlight economic voting as an influencial determinant of the electoral activity and choice upon the re-election in Latvia and Estonia. To achieve it three tasks are to be solved: (1) systemise the theories describing correlations between socio-economic and voting variables, (2) apply appropriate quantitative methodological approach; (3) find out wheter economic voting theory fits to describe actual voters’ behavior in parliament elections Latvia and Estonia, and what diferences can be observed in both countries. As the research method will be used analysis of statistical data by means of a time series model GARCH (p,q) (Generalized Auto Regressive Conditional Heteroskedasticity). Theoretical framework The electoral activity is subject to a number of factors. First of all those are the socioeconomic factors. Secondly it is the social and political mobilization. It has been hypothetically assumed and proven in the conducted researches that the electoral activity is high in the countries where the level of participation in political parties and trade unions is also relatively higher (Siaroff, Merer, 2002). Participation in political parties is of special importance for increasing electoral activity. It is considered that the above accounts for 20% of the total number of electoral factors (Siaroff, Merer, 2002). However, conduct of a comparative international research that would reflect precise information is encumbered due to unavailability of proper data, especially in CEE. Thirdly, it is the voting system and institutional restrictions, fourthly – party fragmentation, competition and party system polarization that also influence the level of electoral participation. According to the Huber- Inglehart scale, if the difference between radical left- wing parties and radical right-wing parties that have obtained al least 10% of votes, is higher than 3.75, the system is considered polarized. At such circumstances the electoral activity is higher (Siaroff, Merer, 2002). The founders of the resource theory Verba and Nie are of the opinion that electoral participation is based upon such variables as education and income. The social and economic status is measured by an indicator which consists of two or three components: education, income and occupation. The critical point of the resource theory is obvious – the components, when taken separately, cannot explain the huge difference that exists among electoral activity in similar developed countries. Even more: the level of education and income in countries with higher electoral activity are not higher. Moreover, the research of Campbell and Rokkan proves that election participation rate is higher among individuals with better education than that of low educated individuals. Similar parallels can be drawn among the levels of education: the higher the socioeconomic status, the more favourable ISSN 1822-8402 EUROPEAN INTEGRATION STUDIES. 2009. No 3 232 the individual is towards participation in elections (Pettersen, Rose, 2002). Lipset (1960) clearly structures the correlation between the social nature and electoral participation, by paying considerable importance to the status. The individuals of lower social groups are characterized by lower level of education, and political participation, insulation and economical insecurity. They read less and are less interested in political issues. These tendencies are mutually interlinked. The economic voting theory supplements the theory of rational choice, by stressing that successful work of political parties in the government results in the increase of economic indicators and overall growth of the state increases the level of well-being of its people, by also leaving a positive impact upon the eventual re-election chances. The most popular indicators for researching the impact of the economic situation upon the electoral choice are: GDP per capita, unemployment rate, price increase or the inflation rate. These indicators are selected because they represent the national economy and at the same time are simple enough; in order the voter could be informed thereabout and could interpret such. Sometimes these indicators are supplemented with tax indicators or the amount of foreign debt of the country. Niemi, Bremer, and Heel (1999) express concerns about the increasing power of mass media in defining the diverse economic and social issues that are linked to the economic situation and development of the country and are of importance. Increasing growth indicators, higher income and lower inflation in the months before the election lead to higher public support to the existing government. It is considered, that individuals that are not satisfied with the economic situation or economic development in the country blame the government and therefore are electorally and politically active. Lipset (1960) indicates that individuals affected by the inflation, monopoly exploitation, depression or structural changes in the economy, might search the solution, by turning against the existing government by means of high electoral activity. The current power elite is awarded with re-election, in the event the economic situation was good or has improved, thus is “punished” if the income on personal or national level has relatively decreased. Anduiza-Perea (2005) calls it “retrospective voting”, because the voters asses the past activities and results of the politicians. Nevertheless, there are at least four factors that encumber impartial outcome of researches on economic voting. First of all, it is the punishment factor. Rosenstone (1982) considers that the motivation to punish the government is much higher than the one of awarding it. It means that in elections individuals tend to express their dissatisfaction more actively than their satisfaction; moreover, economic depression reduces the capacity of political participation of an individual. The research of Becker (2002) on the voters’ behaviour proves that people satisfied with their socio-economic status and general situation in the country in most cases are also satisfied with the current government. In comparison Anduiza – Perea (2005) is of the opinion that an individual will choose a party which is ideologically close to him/her or a party with whom one identifies him/herself with, by adding that individuals are able to analyze the economic competency of the political parties and their electoral choice is directly linked to such proficiency. Secondly, the assessment is encumbered by the ego-centric valuation versus sociotropic valuation. The majority of people are egocentric voters. It means that they evaluate the economic indicators on the basis of the fact whether the economic policy of the state has been favourable for them as individuals. Thirdly, the comparison options are an encumbrance for impartial assessment. The work of the current government is compared with the performance of the same government some time ago. Likewise the voters can compare the results of the work of the government with the work results of some other political party when it was at power. The work of the government can be compared with the work of the government of some other country. Such comparisons often can double or otherwise overlap. Besides, different social groups make different comparisons. Consequently, there is no single comparative system on the basis of which the achievements of the economic policy could be estimated. Fourthly, the economic policy is not the only factor for selection of a political candidate or a party. To a considerable extent the social profile - age, sex, social affiliation, regional belonging, occupation, economic and social status affect voting. Besides, it can be influenced also by the identification with some particular political party, party leader, some topical issue and even the weather. Niemi (1999) proves that the perception of the economic situation by voters is based upon the economic reality – to a considerable extent it reflects the actual economic situation in the country. Although it is affected, depending upon affinity to a particular political party, because the members of the leading political force tend to assess the economic situation more positively and to slight extent, it also depends upon the demographic characteristics of the individual. Freire (2005) specifies that the perception of economy is more important at the moment when the voter gives his vote for a political party at force or a party in opposition than the affiliation to a definite social group. Methodological approach Statistical analysis as a quantitative research method can explain coherency or causations. Many models require the synopsis of historical data. All quantitative forecasting techniques depend on the existence of ISSN 1822-8402 EUROPEAN INTEGRATION STUDIES. 2009. No 3 233 adequate and precise outgoing data. Data are written quantities of activities, objects and events that are applied in order to reflect some operation. Data of historical type contain and display the information about completely finished operation. They sum up the information about the operation in general or every activity in particular. Historical data is usually applied in order to forecast the operations of various events (Gutmanis, 2007). Application of quantitative methods in political science is inhibited by the large amount of narrative information which is difficult to quantify for the further processing. During the last years in scientific literature significant attention is paid to the analysis and forecasting of dynamic series of macroeconomic indices. It is necessary to use statistical data, which characterize the economic processes in question, in the analysis of economical problems various in their content. These statistical data are usually expanded in time, besides one and the same data time series are used in terms of content for solving various problems. At the same time the experience in the world shows that the main attention is paid to model identification problems, selection of endogenous and exogenous indices. Especial interest is brought about by the processes which are in so called „transformation” regime, that is, processes which are stationary in essence nevertheless during the period of research they feature instationary time series properties. During the last 10 years in scientific literature financial time-rows are described with endogenous variables, exogenous variables, and residuals ( ) 1 2 ,s tX k N, = , ,..., tY , tU , which are given with formulas, ( ) 0 1 1 1 n n N s t m t m ms t m t m m s Y b a Y b X U 1 n t l t l t l U cU where t is { , }t t Z is time series of mistakes with conditional mean value and conditional dispersion. 2 2 1 2 1 2{ , ,...} 0 { , ,...}t t t t t t tE E The economic voting trends have been determined by means of a time series model GARCH (p,q) (Generalized Auto Regressive Conditional Heteroskedasticity) (Gutmanis, 2007): 2 2 2 2 0 1 1 p q t k t k k t k t k k k In the time series model each year’s elections consist of VOTE 1 .... n = constant + OPVOTE + INFLA + UNEMPLO + INCOME + WAGES + error, where VOTE LAT / VOTE EST are the number of votes given to parties which were represented in the previous coalition from the total number of votes given in Latvia and Estonia; OPVOTE LAT / OPVOTE EST – the number of votes given to the opposition parties of the previous government, newly established parties and parties that have failed to obtain the required number of votes for entering the parliament in Latvia and Estonia; INFLA = average inflation rate in the country %; UNEMPLO - % changes in the unemployment rate per year, INCOME - GDP per capita, expressed as changes in real prices in USD per year, WAGES = changes in the average gross salary per year. Unemployment pertains to persons who are capable of working and want to work, but cannot find a job. Unemployment level in the country pertains to percentage of unemployed against the number of residents of the state in working age category – both employed and unemployed residents. Employed person in Latvia and Estonia is a person from 15 to 74 years of age. Average monthly gross salary is established by dividing gross payment fund by the number of the employees for whom the salary has been calculated within a certain period. Number of employees who work part-time are re-calculated in full-time units. Statistical data which are related to the changes within the course of one year in Latvia are used in connection with the year of elections because Parliament elections take place in the tenth month of the year while data which are related to the changes within the course of one year in Estonia are used in connection with the last year before the elections, because Parliament elections take place in the third month of the year. Therefore it would not be proper to compare socioeconomic indices of Latvia and Estonia instead of tendencies which correlate with socioeconomic and electoral data thus forming causations and particular features of the country. The compactness level of statistical relationship between two random quantities can be measured by means of correlation pair coefficient. In the view of the fact that coefficient measures the correlation which exists among the members of the same time series, it is called autocorrelation coefficient. By performing the analysis of quantity r(τ) depending on the value of τ, one usually speaks about autocorrelation function r(τ) the chart of which is called also a correlogram. Autocorrelation function is measureless, i.e. it does not depend on the measurement scale of time series to be analyzed. Choice (selection) analogue of autocorrelation function is determined by means of formula (Gutmanis, 2007): .1,...,1, 0ˆ ˆ ˆ1 ˆˆ1 ˆ 1 2 1 T x T xx Tr T t t T t tt ISSN 1822-8402 EUROPEAN INTEGRATION STUDIES. 2009. No 3 234 Time series model coefficients are not standardized therefore it is more convenient for data analysis to apply coefficient values of autocorrelation function that permits to evaluate the compactness of relationship as insignificant (from zero to 0.33 excluded), average (from 0.33 to 0.67 excluded) and significant (from 0.67 to 1). Research has been carried out in relation to the parliamnet (Saeima) elections in 1995, 1998, 2002 and 2006 in Latvia and parliament (Riigikogu) elections in 1995, 1999, 2003 and 2007 in Estonia. Official data from LR Statistical Bureau, Statistical Bureau of the Republic of Estonia, Central Intelligence Agency, Central Election Commission, National Election Commission and State Employment Agency are used in the research. Results The attitude of Estonian electorate towards inflation rate fluctuations is based upon the performance of the government and the voting for parties that were in the government is closely inversely proportionally linked to the inflation rate, what means that in case the inflation rate in Estonia increases, accordingly increases the share of electorate that, by punishing the leading parties, vote for opposition or other parties. In Latvia, although this connection is negative i.e. adversely proportional, the impact of inflation upon the choice of the electorate barely exceeds the border of insignificance. It could have several explanations – inflation in the country is not associated with the work of the government and therefore the electorate is not punishing the political parties for that or it is probable that the motivation behind the electoral choice of Latvia’s electorate is based upon some other factor, not economic voting. A similar situation is observed also with regard the impact of the gross domestic product upon the re-election possibilities of the political parties – in Estonia this connection is very close thereby confirming that GDP growth is considered an achievement of the government. In Latvia changes in GDP are not linked to electorate choice, thereby demonstrating that the situation in the neighbouring countries differs. By considering the insignificant role of the above outlined two important socio-economic factors, it might seem that the impact of socio-economic factors upon the choice of the electorate is rather small. Though, the close correlative link of the unemployment rate and salaries with the votes given to political parties, which formed the previous government, overthrow the previous assumption. Fluctuations in the unemployment rate are estimated to be an important motivation for the voters when making their choice at the ballot-boxes as in Latvia, so in Estonia. Another factor of importance in Latvia is salaries. The correlation is proven by the fact that voters associate increase in the salaries with successful work of the government and in order to preserve this tendency in the next elections, they will vote for these parties which formed government at the moment when the salaries were subject to considerable increase. In Estonia the salary indicator has smaller impact upon the choice of the electorate. The fact that salaries are directly proportionally linked to the inflation and adversely proportionally linked to the employment level, makes conclude that the salary factor is of subordinated importance and depends on the impact of other macroeconomic factors Conclusions Acquiring of results with quantitative research methods in the political science is inhibited by the amount of narrative information. In many cases it is difficult or impossible to quantify them for further processing. Nevertheless in the research of political involvement and comparative analysis the analysis of dynamic series of macroeconomic index which characterize the economic process in question and causations of political behaviour can be successfully used. 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