Businesses eyeing expansion into another country often weigh a number of economic factors before making a decision: a nation’s labor market, regulatory climate, per capita income, tax system, and GDP growth trends.
A working paper coauthored by Harvard Business School Professor Vincent Pons suggests that businesses should also pay attention to a political metric that may offer insights into a country’s democratic institutions and long-term economic prospects: the electoral advantage enjoyed by incumbents.
That’s because incumbents seeking reelection often enjoy several advantages over their challengers, including greater name recognition, fundraising ability, and access to office resources when fending off opponents. The researchers found that, across countries, lower incumbency advantages are associated with higher GDP per capita, stronger accountability, and lower levels of political corruption.
In their analysis of presidential and parliamentary elections around the world since 1945, the authors also show that incumbency advantages vary from country to country, even continent to continent. They explain how those advantages can be used by office holders in some cases to manipulate—and even cancel—elections.
Pons, the Byron Wien Professor of Business Administration, coauthored the paper, “The Global Incumbency Advantage,” with Raphaël Descamps of École Polytechnique, Professor Benjamin Marx of Boston University, and Vincent Rollet of Stanford University.
We talked to Pons about his findings and how incumbency advantages might play out in the coming midterm elections in the United States. Here's what we learned.
Election outcomes can signal democratic health
“Whether incumbents have an advantage or disadvantage in future elections is a very important part of how our democracy works and how healthy democracies are. If you are in a setting where incumbents have a very strong advantage so that they never are chased out of office, this might not be a very healthy democracy.
If instead you're in a setting where incumbents lose the next election no matter what, then that again might also be a worrying sign that there is deep dissatisfaction by the voters regarding how democracy works in their country.”
Election turnovers can support economic growth
“There's a lot of research that shows that having a healthy democracy is a key ingredient for economic growth and therefore for economic conditions that support prosperous business activity. We know, for instance, that countries that democratize do much better economically than those that remain autocracies.
Our work shows that democracies that experience healthy amounts of electoral turnovers—by which I mean elections in which an incumbent party gets defeated and replaced by a new party—are countries that then are often on a better economic trajectory than countries in which the same incumbent party gets systematically reelected.”
Businesses should monitor political conditions
“Understanding the extent to which there is a solid or weak democracy would certainly be something I would be looking for as a business. If you're [starting a business] in a setting with a weak democracy, with weak political institutions, there's much more risk of political turmoil down the line. Perhaps that democracy is switching to a more autocratic system where all the power is concentrated in the hands of the incumbents, which could lead to a lot of uncertainty and to weak economic performance.”
Two regions may treat incumbency differently
“What we find is that there are larger incumbency advantages in two types of regions: in Western Europe and North America, and in African countries. But in the two regions, these effects are driven by very different mechanisms.
In Western Europe and North America, a healthy incumbency advantage comes from the incumbent having an advantage in subsequent free and fair elections.
In African countries, many incumbents are able to stay in power beyond the end of their term because they change the date of the next election, postpone the next election, or cancel the next election altogether.”
Incumbency effects are declining
“One interpretation of the data is that people in countries that do better economically are more content with their incumbents and are more likely to re-elect them, even though we have observed in recent decades a decline in the magnitude of incumbency effects.
If you look at Western Europe and North America, incumbency effects are much weaker today than they were three or four decades ago, which could come from dissatisfaction with the way democracy works and dissatisfaction with our leaders that is much stronger today than it was in, say, the 1970s and 1980s.”
2024 was a rough year for incumbents
“One year that illustrates the principle that economic factors matter is 2024. That year was called the graveyard of incumbents because all around the world, incumbents lost elections. One explanation provided for that anomaly is that, around the world, the economy was not doing great. In particular, there was a lot of inflation, not just in the US, but also in Western Europe and many other regions around the globe.”
Corruption can weaken incumbency advantages
“The level of corruption in a country has political effects. In Asia and Oceania (Pacific Island countries) on one hand and Latin America on the other hand, there are countries with widespread corruption, and where economic performance is weaker.
As a result, there's a broad amount of distrust toward politicians. So, whenever you elect a politician, you assume that this politician might be corrupt and, unless that politician does an excellent job, a voter is more likely to chase the incumbents out of office after the next election.”
Democracy is backsliding, but there is reason for optimism
“There are many indicators that some democratic backsliding is real. One is the decline in voter turnout in many countries. Another is the multiplication of protest movements.
But in our paper, an interesting finding comes from comparing the magnitude of incumbency effects over time. There’s reason for optimism in regions such as Latin America and Asia, where there were negative incumbency effects for years, and incumbents were relatively frequently displaced and actually less likely to remain in power beyond the end of their terms.
This punishment of incumbents seems to be less severe today in Latin America and Asia, suggesting that the population is a bit less dissatisfied with their leaders than it used to be before 1990. That’s perhaps a reason for optimism amid many other reasons to be pessimistic about democracy elsewhere.”
The economy could impact US midterms
“It's very hard to know [the outcome], of course. But as [political consultant] James Carville said, ‘It’s the economy, stupid.’ On that front, we have a little bit of a mixed picture. The level of unemployment remains relatively moderate, and the US has been doing relatively well in terms of economic growth. However, inflation has recently increased as a result of the Trump tariffs and the Iran War. There's the possibility that the incumbent party, which is the Republican Party, gets penalized for these economic conditions.
Of course, it's still a bit early to know for sure, and we will need to monitor economic performance in the next few months before the election.”
Photo credit: Evgenia Eliseeva
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The Global Incumbency Advantage
Descamps, Raphaël, Benjamin Marx, Vincent Pons, and Vincent Rollet. "The Global Incumbency Advantage." NBER Working Paper Series, No. 34968, March 2026.
