Financial Inequality, Group Entitlements and Populism

20 Pages Posted: 15 Nov 2018 Last revised: 27 Feb 2019

See all articles by Federico Favaretto

Federico Favaretto

Bocconi University - BAFFI Center on International Markets, Money, and Regulation; Boston College

Donato Masciandaro

Bocconi University - Department of Economics

Date Written: February 2019

Abstract

This paper shows how financial inequality and misbeliefs about group entitlements can increase the consensus for populist parties. Given a banking shock, traditional and populist parties propose alternative bailout policies, where short termism characterizes the populistic policy. The citizens vote by weighting both psychological and economic items, in accordance with wealth group features. Given the pros and cons due to financial inequality, the populists proposal is more likely to win the more misbeliefs about group entitlements are robust. Citizens vote for populists because “feels good to do it”, triggering a sort of “democratic rioting”. The theoretical framework seem to be consistent with several facts concerning the European Union.

Keywords: Populism, political economics, behavioural economics, financial inequality, monetary policy, banking policy, fiscal policy.

JEL Classification: D72, D78, E52, E58, E62

Suggested Citation

Favaretto, Federico and Masciandaro, Donato, Financial Inequality, Group Entitlements and Populism (February 2019). BAFFI CAREFIN Centre Research Paper No. 2018-92. Available at SSRN: https://ssrn.com/abstract=3279522 or http://dx.doi.org/10.2139/ssrn.3279522

Federico Favaretto

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
46
Abstract Views
340
PlumX Metrics