Confidence or competence: Do presidencies matter for households’ subjective preferences?

This paper investigates how households form subjective preferences. We examine the relationship between subjective economic confidence or sentiments and the perception of the incumbent government's competence, and consider how preferences affect each other. We further consider consequences of different presidencies. A theoretical model shows how households ‘anchor’ subjective views of the incumbent's competence on the household's confidence. Empirical analysis confirms the posited behavior and confirms that different presidencies have a bearing on the relationship.