Working Paper: CEPR ID: DP12944
Authors: Luigi Guiso; Helios Herrera; Massimo Morelli; Tommaso Sonno
Abstract: Populist parties are likely to gain consensus when mainstream parties and status quo institutions fail to manage the shocks faced by their economies. Institutional constraints, which limit the possible actions in the face of shocks, result in poorer performance and frustration among voters who turn to populist movements. We rely on this logic to explain the different support of populist parties among European countries in response to the globalization shock and to the 2008-2011 financial and sovereign debt crisis. We predict a greater success of populist parties in response to these shocks in Euro zone countries, and our empirical analysis con firms this prediction. This is consistent with voters' frustration for the greater inability of the Euro zone governments to react to dicult-to-manage globalization shocks and financial crises. Our evidence has implications for the speed of construction of political unions. A slow, staged process of political uni cation can expose the EU to a risk of politicalbacklash if hard to manage shocks hit the economies during the integration process.
Keywords: frustration; relocation; globalization; financial dependence; populism
JEL Codes: D72; D78; F14; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| globalization and financial crises (F65) | increased support for populist parties (D72) |
| Policy Straitjacket (PSJ) effect (H73) | increased support for populist parties (D72) |
| Policy Straitjacket (PSJ) effect (H73) | voter frustration (K16) |
| voter frustration (K16) | increased support for populist parties (D72) |
| relocation effect (J62) | increased support for populist parties (D72) |
| relocation effect (J62) | economic insecurity (F52) |
| economic insecurity (F52) | increased support for populist parties (D72) |
| increase in imports from China (F69) | increased support for populist parties in Eurozone regions (F65) |
| increase in imports from China (F69) | decreased support for populist parties in non-Eurozone regions (F69) |
| higher financial dependence (G59) | greater increases in populist support during financial crises (P34) |