Inequality, Macroeconomic Performance and Political Polarization: An Empirical Analysis

• • 
  • Presentation speakers
    • Juan Carlos Peña, University of Bamberg, Germany
    • Christian R. Proaño, University of Bamberg, Germany
    • Thomas Saalfeld, University of Bamberg, Germany

  Abstract:

  There is an unprecedented wave of populist movements across Western Europe and beyond in the last years. The increasing electoral support of these populist movements was a signal that at any time they can obtain the political power. This is how Italy was the first that will be governed by a populist coalition during the next years. This situation increases not only political polarization across Europe, which reflects that the voting pattern of some individuals appears more ideologically extreme, but also puts enormous pressure on the other established European political parties. As a result, more polarized political systems produce economic inefficiencies and lower growth. Moreover, the political gridlock may explain why economies experience slow recoveries from recessions and financial crises. This Paper investigates the determinants of political polarization with special focus on income inequality. We construct a dataset for 20 advanced countries using annual data ranging from 1970 to 2016 by covering 292 parliamentary elections. We show that a) traditional mainstream parties (center-left, center, and center-right) are punished for bad economic conditions; b) far-left (populist and radical parties) parties benefit under economic distress; c) greater income inequality shift voting behavior and rise the electoral support of far-left parties; d) far- right (populist and radical parties) parties benefit with recession but not form financial crises and finally; e) It seems that social globalization plays also a role, in particular for far-right parties.

 

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