Economic growth and political extremism
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Economic growth and political extremism Markus Brückner1 · Hans Peter Grüner2,3 Received: 3 September 2019 / Accepted: 16 October 2019 © Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract We argue that the growth rate, but not the level of aggregate income, affects the support for extreme political parties. In our model, extreme parties offer short-run benefits to part of the population at the expense of a minority. Growth effects on the support for such parties arise when uncertainty exists over whether the same subset of individuals will receive the same benefits in the future. More people are willing to take political risks if economic growth is slow. Based on a panel of 16 European countries, our empirical analysis shows that slower growth rates are associated with a significant increase in right-wing extremism. We find no significant effect of economic growth on the support for extreme left-wing parties. Keywords Economic growth · Political extremism · Inequality JEL Classification O40 · O52 · P16
1 Introduction Distributional consequences are associated with political extremism, both in the short run and in the long run. Extreme political parties often propose to redistribute resources away from specific subgroups of society, such as the rich, ethnic minorities, or citizens living in specific regions. This paper analyzes the impact of economic growth on the support for extreme political parties in western democracies. We argue that the growth rate, but not the level of aggregate income, affects the support for extremism. In the first part of our paper, we discuss three alternative explanations for why an increase in the economic growth rate reduces the support for extreme political parties. Two well-known explanations are related to retrospective voting and behavioral effects, the latter meaning that voters may react more strongly to changes in than to levels of economic * Markus Brückner [email protected] Hans Peter Grüner [email protected]‑mannheim.de 1
Research School of Economics, Australian National University, Acton, Canberra 0200, Australia
2
Department of Economics, University of Mannheim, L 7, 3‑5, 68131 Mannheim, Germany
3
CEPR, London, UK
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Public Choice
well-being. The third, novel explanation is that parties with extreme political platforms are perceived to create considerable uncertainty about the future distribution of income. We develop a simple game-theoretic model that analyzes that uncertainty effect. In our model, extreme political parties offer short-run gains from redistribution to a group of individuals. However, the same individuals also face long-run losses owing to the higher income risk that is associated with an extreme regime.1 The model permits a comparative static analysis with respect to several key variables of interest. The growth rate is associated with larger future income risk. Such risk reduces the number of voters favoring extreme parties. The level of aggregate income has no effect on the supp
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