August 19, 2020
Leonardo Baccini (McGill) and Thomas Sattler (Geneva)
Abstract
Globalization and automation have exposed many citizens to enhanced social risks. Our study examines the political effects that arise when governments fail to provide economically vulnerable voters with support to cope with these risks. Specifically, we examine the effect of austerity on votes in Western countries since the early 1990s using both district-level election outcomes and individual-level voting data. Our empirical strategy identifies economically vulnerable regions looking at the share of low-skilled workers, share of manufacturing production, and share of workers in routine jobs. The results from a difference-in-difference analysis show that austerity increases support for economically nationalist parties in economically vulnerable regions, but austerity has little effect on voting in economically less vulnerable regions. Moreover, we find that right populist parties tend to gain significantly more than left populist parties in economically vulnerable regions in case of austerity. Our findings indicate that fiscal cutbacks and the resulting lack of insurance against economic shocks, contribute significantly to the rise of populist parties and the backlash against globalization.