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Emilie SARTRE (CREST) “Toxic Loans and The Rise in Populist Candidates “
September 7, 12:15 pm - 1:30 pm
Time: 12:15pm – 13:30 pm by Zoom.
Date: 07th of September 2020
Emilie SARTRE (CREST) “Toxic Loans and The Rise in Populist Candidates”
Abstract : While the importance of financial crises in boosting populist voting is acknowledged, the role played by institutional shocks at a time of financial crisis has been so far neglected. In this paper, we contribute to the current literature by studying how the supply of populist candidates reacts to the revelation of a public finance scandal – the leak on September 2014 of a list of French municipalities which contracted “toxic” loans to the bank Dexia. Using an identification strategy based on instrumental variable, we find that during the subsequent local elections in 2014, municipalities labeled for contracting toxic loans experienced an increase in vote share for the far right only and a decrease in vote share for the incumbent’s political party. Although the increase in far-right voting has been sufficiently small to prevent the renewal of the political class, municipalities exposed by the scandal saw a significant increase in electoral competition, particularly through an increase in both far-right and far-left candidacies. This rise in populist candidates and the resulting increase in vote share for the far right do not appear driven by a loss in personal trust or by the consequences of adverse economic shocks, following the scandal. One potential explanation is that the far right not only entered more in municipalities hit by the scandal, but also benefited from a higher press coverage during the electoral campaign, challenging the incumbent on his side.
Joint work with : Gianmarco Daniele (University of Milan), Paul Vertier (Banque de France)