Brookings Papers on Economic Activity

ABSTRACT:

We study the implications of the Great Recession for voting for antiestablishment parties, as well as for general trust and political attitudes, using regional data across Europe. We find a strong relationship between increases in unemployment and voting for nonmainstream parties, especially populist ones. Moreover, unemployment increases in tandem with declining trust toward national and European political institutions, though we find only weak or no effects of unemployment on interpersonal trust. The correlation between unemployment and attitudes toward immigrants is muted, especially for their cultural impact. To explore causality, we extract the component of increases in unemployment explained by the precrisis structure of the economy, in particular the share of construction in regional value added, which is strongly related both to the buildup preceding and the bursting of the crisis. Our results imply that crisis-driven economic insecurity is a substantial determinant of populism and political distrust.