Global Crises and Populism: The Role of Eurozone Institutions

46 Pages Posted: 21 May 2018

See all articles by Luigi Guiso

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF)

Helios Herrera

University of Warwick

Massimo Morelli

Bocconi University

Tommaso Sonno

University of Bologna; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Date Written: May 2018

Abstract

Populist parties are likely to gain consensus when mainstream parties and status quo institutions fail to manage the shocks faced by their economies. Institutional constraints, which limit the possible actions in the face of shocks, result in poorer performance and frustration among voters who turn to populist movements. We rely on this logic to explain the different support of populist parties among European countries in response to the globalization shock and to the 2008-2011 - financial and sovereign debt crisis. We predict a greater success of populist parties in response to these shocks in Euro zone countries, and our empirical analysis confirms this prediction. This is consistent with voters' frustration for the greater inability of the Euro zone governments to react to di cult-to-manage globalization shocks and financial crises. Our evidence has implications for the speed of construction of political unions. A slow, staged process of political unification can expose the EU to a risk of political backlash if hard to manage shocks hit the economies during the integration process.

Keywords: Financial Dependence, Frustration, Globalization, populism, Relocation

JEL Classification: D72, D78, F14, F16

Suggested Citation

Guiso, Luigi and Herrera, Helios and Morelli, Massimo and Sonno, Tommaso, Global Crises and Populism: The Role of Eurozone Institutions (May 2018). CEPR Discussion Paper No. DP12944, Available at SSRN: https://ssrn.com/abstract=3182407

Luigi Guiso (Contact Author)

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Helios Herrera

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

Massimo Morelli

Bocconi University ( email )

Via Roentgen 1
Milan, 20136
Italy

Tommaso Sonno

University of Bologna ( email )

Bologna
Italy

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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