Exogenous shocks and voter behaviour in Central and Eastern Europe

Populism and populist leaders have been grabbing the headlines of the international media for the better part of the 2010s. A stream of literature using econometric methods has analysed the connection between economic factors, cultural factors and the share of the populist vote, however the results have been mixed. While Inglehart and Norris (2016) and Mutz (2018) found that cultural factors influence voters far more when voting for populist parties, Guiso et al., (2018) found the opposite: economic decline will influence voters to vote for populist parties. This paper identifies two major shocks for investigation: the unemployment shock of the Financial Crisis of 2008/2009 and the globalization shock of China joining the WTO in 2001. The shock of the financial crisis led to a huge rise in unemployment for which the traditional parties had no answers, leading for voters to seek out alternative parties, promising them quick and easy solutions. The globalization shock of China joining the WTO, led to manufacturing regions experiencing additional competition for the goods they produced resulting in layoffs and loss of business. This increased support for populist parties. This article uses a 2SLS estimation method and IV variables to test the relationship between exogenous shocks and voting for populist parties. The article finds that both unemployment and both the globalization shock are significant factors in explaining the populist vote, therefore if governments want to act against it, they have to provide fiscal support to people suffering from the exogenous effects of financial crises and globalization.