When Does the Public Get It Right? The Information Environment and the Accuracy of Economic Sentiment

Abstract

Public evaluations of the economy are key for understanding how citizens develop policy opinions and monitor government performance. But what drives economic evaluations? In this article, we argue the context in which information about the economy is distributed shapes economic perceptions. In high-quality information environments—where policies are transparent, the media is free, and political opposition is robust—mass perceptions closely track economic conditions. In contrast, compromised information environments provide openings for political manipulation, leading perceptions to deviate from business cycle fluctuations. We test our argument with unique data from eight Latin American countries. Results show restrictions on access to information distort the public’s view of economic performance. The ability of voters to sanction governments is stronger when democratic institutions and the media protect citizens’ access to independent, unbiased information. Our findings highlight the importance of accurate evaluations of the economy for government accountability and democratic responsiveness.