Topics in Political Economy
Paper Session
Sunday, Jan. 8, 2023 1:00 PM - 3:00 PM (CST)
- Chair: Nathan Canen, University of Houston
The Political Costs of Austerity
Abstract
Anti-establishment and Eurosceptic parties have gained significant support since the Great Recession and the subsequent European Sovereign Debt Crisis. Higher vote shares for these parties have increased partisan conflict, led to more fragmented parliaments and the resulting political environment is generally associated with higher policy uncertainty and lower economic growth. Notably, the rise in extreme parties support occurred in a period of significant fiscal policy interventions. In particular, several European countries have implemented large-scale fiscal consolidation measures to bring down elevated public debt levels and reduce the risk of sovereign default. The massive reductions in public spending faced significant opposition and resulted in an anti-austerity movement. In this paper, we empirically investigate the coincidence between both developments and study whether fiscal austerity contributed to the increase in vote shares for extreme parties over the last decades.To this end, we construct a novel regional dataset on election outcomes that provides detailed voting results on regional, national, and European elections. We rely on established party classifications to define parties at the far-right and far-left. Our final dataset covers 146 European regions from 9 countries, spans from 1980 until 2018, and includes around 20 elections per region. To identify exogenous reductions in regional public spending, we use a Bartik-type instrument that combines regional sensitivities to changes in national government expenditures with narrative national consolidation episodes. We find that fiscal consolidations lead to a significant increase in vote shares for extreme parties and raise political fragmentation. We highlight the close relationship between economic developments and voters support for extreme parties by showing that austerity induces severe economic costs through lowering GDP, employment, private investment and wages. Fiscal consolidations account for a significant share in voters support for extreme parties and are associated with stronger negative political consequences than normal business cycle recessions.
Profiling Insurrection
Abstract
We develop a novel approach for estimating spatially dispersed community-level par-ticipation in mass protest. This methodology is used to investigate factors associated
with participation in the ‘March to Save America’ event in Washington, D.C. on Jan-
uary 6, 2021. This study combines granular location data from more than 40 million
mobile devices with novel measures of community-level voting patterns, the location
of organized hate groups, and the entire georeferenced digital archive of the social
media platform Parler. We find evidence that partisanship, socio-political isolation,
proximity to chapters of the Proud Boys organization, and the local activity on Parler
are robustly associated with protest participation. Evidence from communities with
close election outcomes in 2020 suggests narrow losses by Trump triggered a spike in
participation. Our research fills a prominent gap in the study of collective action:
identifying and studying communities involved in mass-scale events that escalate into
violent insurrection.
The Effect of Female Leadership on Contracting from Capitol Hill to Main Street
Abstract
This paper provides novel evidence that female politicians increase the proportion of US government procurement contracts allocated to women-owned firms. The identification strategy uses close elections for the US House of Representatives. The effect concentrates in local contractors and persists after the female politician’s departure. The more gender-balanced representation in government contracting does not seem to be associated with economic costs, as the firm characteristics of the average contractor and contract performances are unchanged. By analyzing congressional requests from legislators to federal agencies, we show that female politicians affect procurement contract allocation through individual oversight.Polarized Expectations, Polarized Consumption
Abstract
This paper argues that political polarization plays a key role in shaping the economic expectations and consumption behavior of households. Using a combination of survey and consumption data of U.S. households, we document five facts. First, household beliefs are well-described by a single factor, which behaves like sentiment. Second, at any given time there is wide dispersion in household sentiment, largely driven by political affiliation. Third, household sentiment is highly persistent, with one exception: following elections when the White House switches parties, optimistic households become pessimistic and vice versa. Fourth, the magnitude of this switching behavior has increased over time. Fifth, consumption responds differentially along party lines following changes in the White House. We show that standard theories of expectation formation struggle to simultaneously rationalize these facts.JEL Classifications
- E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook