Economic Insecurity and Political Stability: A Case for Growth-Targeting Systemic Vote

51 Pages Posted: 22 Feb 2015 Last revised: 21 Jan 2017

See all articles by Konstantinos Matakos

Konstantinos Matakos

King's College London, Dept. of Political Economy

Dimitrios Xefteris

University of Cyprus

Date Written: January 2017

Abstract

In the period after the break of the Great Recession a series of drastic changes in the political systems of many affected countries occurred: the predominant role of systemic parties in forming political outcomes was challenged and many previously non-systemic voices gained significant political power. A simplistic reading of this fact suggests that economic insecurity constitutes a general threat to political stability. In this paper we focus on the years before the Great Recession (1960-2007) and -- after addressing possible issues of endogeneity -- we present evidence from 22 OECD countries that contradicts this conclusion: when the economy is not in turmoil, there is a strong positive relationship between unemployment -- the major macroeconomic determinant of economic insecurity -- and electoral support for systemic parties. That is, democratic politics respond to increasing economic insecurity by enhancing the prospects of political stability and, consequently, economic prosperity and growth (Alesina et al. 1996).

Keywords: systemic parties, political stability, unemployment, economic voting, growth

JEL Classification: C26, D72, O42

Suggested Citation

Matakos, Konstantinos and Xefteris, Dimitrios, Economic Insecurity and Political Stability: A Case for Growth-Targeting Systemic Vote (January 2017). Available at SSRN: https://ssrn.com/abstract=2567834 or http://dx.doi.org/10.2139/ssrn.2567834

Konstantinos Matakos (Contact Author)

King's College London, Dept. of Political Economy ( email )

Strand Campus
London, WC2R 2LS
United Kingdom

HOME PAGE: http://https://sites.google.com/site/kostasmatakos/

Dimitrios Xefteris

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus

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