From Finance to Fascism: the Real Effect of Germany's 1931 Banking Crisis

53 Pages Posted: 26 Mar 2018 Last revised: 16 Jun 2020

See all articles by Sebastian Doerr

Sebastian Doerr

Bank for International Settlements

Stefan Gissler

Board of Governors of the Federal Reserve System

José-Luis Peydró

Imperial College London; Centre for Economic Policy Research (CEPR); Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)

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Date Written: March 2018

Abstract

Do financial crises radicalize voters? We study Germany's banking crisis of 1931, when two major banks collapsed and voting for radical parties soared. We collect new data on bank branches and firm-bank connections of 5,610 firms. Incomes plummeted in cities affected by the bank failures; connected firms curtailed payrolls. Nazi votes surged in locations exposed to Danatbank, led by a Jewish manager - but not in those suffering from the other bank's failure. Unobservables or pre-trends do not explain the results. Danatbank's collapse boosted Nazi support, especially in cities with deep-seated anti-Semitism, suggesting a synergy between cultural and economic channels.

Keywords: extremism, financial crises, Germany, Great Depression, Nazi Party, Polarisation, Real effects

Suggested Citation

Doerr, Sebastian and Gissler, Stefan and Peydro, Jose-Luis and Voth, Hans-Joachim, From Finance to Fascism: the Real Effect of Germany's 1931 Banking Crisis (March 2018). CEPR Discussion Paper No. DP12806, Available at SSRN: https://ssrn.com/abstract=3149476

Sebastian Doerr (Contact Author)

Bank for International Settlements ( email )

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CH-4002 Basel
Switzerland

HOME PAGE: http://www.sdoerr.com

Stefan Gissler

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jose-Luis Peydro

Imperial College London ( email )

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

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Spain
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(+34) 93 542 1746 (Fax)

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

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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