Toxic Loans and the Entry of Extreme Candidates

53 Pages Posted: 9 Aug 2018

See all articles by Gianmarco Daniele

Gianmarco Daniele

Bocconi University; Baffi Carefin Centre, Bocconi University

Emilie Sartre

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Paul Vertier

Sciences Po - LIEPP

Date Written: July 6, 2018

Abstract

Despite the importance of the 2008 financial crisis in explaining the growing trend of extreme and populist voting, the role played by public finance mismanagement has been so far neglected. In this paper, we study the electoral consequences of a public finance scandal: the leak on September 2011 of a list of French municipalities which contracted "toxic" loans to the bank Dexia. Using an instrumental variable strategy, we find that during the subsequent local elections in 2014, municipalities with toxic loans had a higher number of political parties and a higher share of extreme candidates. These effects were stronger in economically fragile municipalities and in cities with a higher growth of the immigrant population. The findings suggest that the revelation of public finance misconduct fosters the entry of extreme politicians, thus increasing their vote shares and decreasing the support for the incumbents' parties.

Suggested Citation

Daniele, Gianmarco and Sartre, Emilie and Vertier, Paul, Toxic Loans and the Entry of Extreme Candidates (July 6, 2018). Available at SSRN: https://ssrn.com/abstract=3209238 or http://dx.doi.org/10.2139/ssrn.3209238

Gianmarco Daniele

Bocconi University ( email )

Baffi Carefin Centre, Bocconi University ( email )

Via Roentgen 1
Milan
Italy

Emilie Sartre

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Paul Vertier (Contact Author)

Sciences Po - LIEPP ( email )

254 Boulevard Saint-Germain
Paris Cedex 07, 75337
France

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