The Economy and Presidential Approval in Russia

By Alisha Armas

In the United States, politicians always have one weary eye on the economy. If it plummets, they fear losing the next election, because the public will hold them accountable for the economic downturn. Perhaps most famously, Bill Clinton’s quip “it's the economy stupid” captures this sentiment, pointing to the ongoing recession in his presidential campaign against George H. Bush. In this blog, I examine the effect of the economy on presidential approval ratings in Russia to see if this same relationship holds true. Evaluating the relationship between the economy and presidential approval in Russia is of great importance, especially now that the West is using sanctions in an effort to influence Russian actions in Ukraine. I argue that despite the recent surge in Putin’s approval rating, which coincides with a decline in economic growth, poor economic performance in Russia generally causes low presidential approval ratings.

 

As Figure 1 shows, presidential approval appears to be connected to economic growth. For example, while economic growth remains negative, Yeltsin’s approval generally declines. Meanwhile, shortly after economic growth jumps from about -6% to about 4% in the late 1990s, presidential approval also jumps. Economic growth again declines to negative numbers just before 2009, and presidential approval falls shortly afterwards. Although economic growth was negative prior to the 1996 elections, Yeltsin was still reelected, seeming to violate the accountability mechanism. However, there was also a fear of a return to communism, as the Communist Party candidate, Gennady Zyuganov, was Yeltsin’s main challenger, and Yeltsin’s approval ratings still suffered. The election, then, may have been a choice between the lesser of two evils rather than a violation of the relationship between the economy and presidential approval.

To evaluate the effect of the economy on presidential approval in Russia, I use time series analysis with fixed effects for Russia's different presidents: Boris Yeltsin (July 1991—December 31, 1999), Vladimir Putin (December 31, 1999—May 7, 2008 and May 7, 2012—present), and Dmitri Medvedev (May 7, 2008—May 7, 2012). I measure economic performance as GDP growth, calculated as the percent change from the previous period. Although inflation also measures economic performance, inflation is associated with economic expansion and presidential approval may increase as inflation increases.

For presidential approval, I use data collected by the Levada Center, a respected survey organization in Russia, that is available from RussiaVotes.org. Respondents rate presidential performance on a scale of 1 (lowest) to 10 (highest). Because there is strong trending in presidential approval ratings, I use the change in approval rating between periods (first differences). [1]  While economic data is reported quarterly, the Levada Center sometimes surveyed the population on presidential approval quarterly, and sometimes more frequently. In cases where there is more than one survey in a quarter, I calculate the average (mean) score for that quarter.

In addition, I include several policies that can affect both presidential approval and economic performance. These policies are:

1. Shock Therapy: A policy intended to rapidly privatize the Russian economy. It was initially very popular and Yeltsin promised that the accompanying economic hardship would only last for six months. The policy began in early 1992.
2. Loans for Shares: A policy implemented in September 1995 that was designed to help the government meet its financial obligations and fund Yeltsin's presidential campaign. [2]  Russia's oligarchs loaned money to Yeltsin in exchange for shares in some of Russia's largest industries, which had remained under government control.
3. 1st Chechen War: A 20-month war from December 1994 through May 1996 (peace agreement) to prevent the secession of Chechnya from Russia. [3] The war was very unpopular, in part due to widespread media coverage. [4]
4. Annexation of Crimea: In March 2014, Russia annexed Crimea following the EuroMaidan protests in Ukraine. The annexation was very popular in Russia, but resulted in economic sanctions imposed by the West that have hurt the Russian economy.

Each of these policies is a binary variable, which is 1 when the policy may have an effect and 0 otherwise. For each policy, except the 1st Chechen War, I measure the long-term effect, which lasts until the end of the incumbent’s presidency. I exclude the long-term effect of the 1st Chechen War because of it is too closely related to another variable and so its effect cannot be estimated. In addition, I measure the short-term effect of Loans for Shares and the 1st Chechen War, which lasts for a few months (1-2 quarters). I do not measure the short-term effect for the other policies because of a lack of data. To show that economic performance affects presidential approval and not the other way around, I use data from the previous period for economic performance and the policies identified above. While it is possible that these factors take longer than one quarter to affect presidential approval, I cannot test this because of the limited number of observations.

 

Regression analysis shows that economic growth has a positive effect on presidential approval: for a 1-percentage point increase in GDP growth, on average, there is a 0.05-point increase in presidential approval ratings, all else constant. This effect is statistically significant. However, the small effect of economic growth on presidential approval means that there must be large contractions in the Russian economy for presidential approval to drop in a meaningful way. Orchestrating such drastic drops in the Russian economy is not easy, as the recent sanctions against Russia for its annexation of Crimea show. Furthermore, the effect of the Crimean annexation cannot be calculated. Thus, the annexation of Crimea may affect both presidential approval and economic growth, and may affect each in different ways. Thus, although economic performance has an effect on presidential approval, its small effect makes it difficult to extrapolate policy advice from the results.

Appendix 1.

Notes:

[1] Economic growth is already a difference between periods, and does not have the same trending problem as presidential approval. Furthermore, taking the difference in GDP growth reduces the number of observations, which is already low. Therefore, I do not use differences in economic growth.
[2] David E. Hoffman, The Oligarchs: Wealth and Power in the New Russia (PublicAffairs: New York, 2011), 313.
[3] BBC News Timeline: Chechnya
[4] While I include the 1st Chechen War, I exclude the 2nd Chechen War (early 2000s) because of collinearity and unlike the first war, there was little media coverage of the event. Therefore, the second war may not have had a large effect on public opinion.