Left Behind? Electoral Effects of Regional Policies

Globalization is changing domestic politics in contemporary Western democracies. Most prominently, it manifests itself in increasing vote shares of challenger parties that exploit anxieties about globalization and immigration. Recent research points to regionally concentrated trade shocks as one structural driver of local variation in election outcomes of these challenger parties such as the populist far right. At the same time, a lot of countries have policies at place to compensate and support economically disadvantaged regions. It raises the question whether regional support of structurally disadvantaged and declining areas can lower vote shares of challenger parties. To shed light on this question, I leverage allocation rules determining eligibility to German regional policy to examine the causal link between regional policy and local level election outcomes. Specifically, I exploit a regional index ranking of structural development which largely determines eligibility for a fuzzy regression discontinuity design. My findings for the 2017 German federal election indicate that the vote share of the right-wing populist challenger party was lower in regions eligible to funding than in comparable regions without assistance. Simultaneously, I document higher vote shares for the conservative incumbent party, CDU/CSU. This study is the first to examine the electoral effects of place-based regional policies. It connects the political science literature on challenger parties and right-wing populist voting with the economic literature on labor market effects of regional policies. The findings imply that regional redistributive policies may function as a political response to the recent rise of right-wing populist challenger parties.