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Emilie SARTRE (CREST) – "Toxic Loans and the Rise of Populist Candidacies"
CREST Microeconomics Seminar :
Date: 9th December 2020
Abstract: : The role of ﬁnancial crises in boosting populism has been well documented. Yet the speciﬁc mechanisms through which this occurs remain elusive. This paper studies how populist candidacies were fueled by a public ﬁnancial scandal, triggered by market volatility and ﬁnancial deregulation. Using an instrumental variable strategy, we exploit the leak of a list of French municipalities which contracted “toxic” loans prior to the crisis as a source of identiﬁcation. During the subsequent municipal elections, we show that i) populist parties were the main political parties experiencing an increase in vote share, while the incumbent’s political party was electorally punished, ii) both far-right and far-left populist candidacies were more likely in municipalities aﬀected by the scandal, leading to a rise in electoral competition, iii) for the populist far-right, these last results were stronger in economically fragile municipalities and in cities with a higher growth of the immigrant population. Importantly, the findings are not driven by the economic aftermath of the scandal and suggest that public mismanagement disclosure contributes by itself to the rise of populism during financial crises. With Gianmarco Daniele and Paul Vertier.
Roxana Fernandez Machado (CREST), Julien Combe (CREST), and Matias Nunez (CREST)