Economic Uncertainty and Divisive Politics: Evidence from the 'dos Españas'
54 Pages Posted: 13 Jan 2021
Date Written: January 13, 2021
Abstract
This article exploits two newspaper archives to track economic policy uncertainty in Spain in 1905-1945, a period of extreme political polarization. We find that the outbreak of the civil war in 1936 was anticipated by a striking upward level shift of uncertainty in both newspapers. We study the dynamics behind this shift and provide evidence of a strong empirical link between increasing uncertainty and the rise of divisive political issues at the time: socio-economic conflict, regional separatism, power of the military, and role of the church. This holds even when we exploit variation in content at the newspaper level.
Keywords: economic policy uncertainty, civil war, social conflict, agrarian reform, natural language processing, tf-idf
JEL Classification: D72, D74, N14, N24, N44
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