What are the long-term political consequences of economic crises? We assess the enduring impact of the Great Recession on U.S. political outcomes. We employ a difference-in-differences approach, leveraging geographic variation in unemployment shocks. Contrary to claims that major recessions primarily boost anti-incumbent, far-right candidates, we find that counties more severely affected by the recession experienced a sustained increase in Democratic vote shares, particularly in Congressional elections. These effects persisted for at least 10 years. We demonstrate that these results are unlikely to be due to persistent economic decline, demographic changes, shifts in candidate ideology, or fiscal compensation spending. Instead, survey evidence suggests that the recession lowered expectations for upward mobility, likely increasing support for redistribution and thereby benefiting Democratic candidates. Our findings expand the literature by showing that (i) severe economic shocks do not necessarily favor right-wing populists, and (ii) major downturns can continue to influence electoral outcomes long after direct economic consequences have subsided.
Economic Insecurity Increases Polarization and Decreases Trust
(with Joanna Bryson).
[Abstract]
The causes of polarization and distrust are not well understood, and subject to competing hypotheses. Here we test empirically whether economic precarity is a cause. Precarity is thought to increase both political polarization and distrust due to individual risk aversion. We empirically test predictions of this hypothesis globally at both macro, country and micro, individual levels. Further, we exploit exogenous variation in European individuals' exposure to Chinese import shocks to establish a causal relation between economic insecurity and decreasing trust. We find that economic insecurity, in the form of income inequality and unemployment at the macro-level, and perceived economic insecurity at the individual level, are associated with increases of affective polarization, and of public distrust. Our work indicates the importance of social safety nets for maintaining social cohesion.