https://orcid.org/0000-0002-5148-7635
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Abstract
This paper investigates the macroeconomic and social determinants of voting behavior, and especially of political polarization – defined here as the increasing electoral success of far-right and far-left parties – in 20 advanced countries using annual data from 1970 to 2016 and covering 291 parliamentary elections. Our analysis indicates that the link between income inequality and political polarization appears to have significantly changed over the last 20 years. Indeed, we find that both average net income inequality, as well as the bottom 10% income share are statistically linked to the recent success of far-right parties (but not of far-left parties), while the top 10% or top 20% income shares are not. The link of income inequality and political polarization, and in particular the increasing success of far-right parties, thus seems to be based on the deterioration of the relative economic position especially of the poorest fraction of the population.
Acknowledgements
We would like to thank Sven Schreiber, Thomas Theobald, Sebastian Watzka, Emanuel Gasteiger, Mishael Milaković, Anica Kramer, Hagen Krämer, Zeno Enders, Christian Conrad and seminar participants at the Macroeconomic Policy Institute (IMK) research seminar, the First Behavioral Macroeconomics Workshop at the University of Bamberg, the XX World Economy Meeting at the University of Almería, the VI International Congress on Economics at the Universidad San Francisco de Quito (USFQ), the 22nd Forum for Macroeconomics and Macroeconomic Policies 2018 in Berlin, the 12th CFE Conference in Pisa, the 2019 Eastern Economic Association in NYC, the 5th European Workshop on Political Macroeconomics, the University of Heidelberg and the University of Chemnitz, and the two referees of these journal for their helpful comments and suggestions, as well as Marie Louis Hohloch, Sandra Niemeier and Katharina Schwab for excellent research assistance. Financial support by the Hans-Böckler Foundation is gratefully acknowledged. This is a significantly revised version of the 2019 BERG Working Paper 149 ‘Inequality, Macroeconomic Performance and Political Polarization: An Empirical Analysis’.
Disclosure statement
No potential conflict of interest was reported by the authors.
Data availability statement
All data and replication codes of this paper can be publicly accessed at https://doi.org/10.7802/2367
.Notes
1 Alternatively, Voorheis et al. (Citation2015) and Duca and Saving (Citation2016) and other related studies use a different concept for polarization based, in a nutshell, on the distance between the mean ideological points of the U.S. Democratic and Republican parties within a legislative chamber. Such data exists only for the United States, and not for other countries, and certainly not for the time span we consider in our study.
2 Another important contribution related to the success of far-right parties is the work of de Bromhead et al. (Citation2012) who shows how far-right parties benefit in hard economic periods during the 1920s and 1930s. They define ‘hard economic periods’ as times characterized by contractions of GDP.
3 Recently, Di Guilmi and Galanis (Citation2021) outline in a theoretical dynamic two-party model with endogenous voter's preferences how political polarization can emerge as a consequence of weak economic performance, increasing inequality and a sufficiently strong bandwagon effect (Leibenstein Citation1950, Simon Citation1954) that pushes individuals to follow their peers.
4 As we will discuss below, this finding is in stark contrast to our results. It should be noted, however, that their measure of polarization is based on the aggregation of subjective responses by correspondents in each of the countries they study, while our measure is based on the share of seats in the parliament occupied by far-left and far-right countries.
5 Most years only include one election, with the exception of Greece, which held two national elections in 2012. In this case, we used the second election from that year.
6 We are aware that this party classification may have some limitations, e.g. because many political parties have changed their ideologies and positions over time. Unfortunately, to the best of our knowledge, there is no existing dataset which would account for these structural shifts in the analyzed countries. Further, some studies such as Rodrik (Citation2018) distinguish between ‘populism’ and ‘extremism’, categorizing Syriza and Podemos as populist rather than far left parties. We will abstain from a further differentiation here and stick to the party classification by Funke et al. (Citation2016), and leave a more detailed analysis for further research.
7 We use also the pre-tax Gini coefficient (GiniMarket) as a robustness check and report the estimation results using this variable in Appendix G.
8 Moreover, Bartolini (Citation2000) shows that the success of communist parties has been historically more marked in countries with socioeconomic problems.
9 It is also important to note that some countries in our sample data illustrate a relatively higher presence of radical and populist parties on both extremes of the political spectrum. The presence of far-left parties is relatively higher in Greece, Spain, Italy, and Ireland compared to the other countries of the sample. Similarly, the presence of far-right parties is more pronounced in Austria, Denmark, Finland, Norway, and Switzerland compared to the other countries of the sample.
10 We use a clustering scheme for the possible cross-country-correlation as most cross-country effects may be reflected by similar macroeconomic developments and not by unexplained disturbances.
11 As previously mentioned, we also estimated the following regression models using the pre-tax variant of the Gini coefficient (GiniMarket). As this variable is only indirectly related to the actual income distribution perceivable by households in an economy, the results of those regressions were much weaker than the ones using the after-tax Gini coefficient (GiniNet), as expected. We report the estimation results using GiniMarket in Appendix G.
12 See Section 3.1 for a detailed discussion of FLVS, FRVS, and MVS categories.
13 In the current study, we do not differentiate between mainstream parties that were in the government when the elections took place and mainstream parties that were not in the government. We intend to investigate how the ideological proximity to government parties may affect the electoral support of other mainstream parties not in the government in a follow-up project.
14 Moreover, the positive (negative) effect of GiniNet on FRVS (MVS) remains statistically significant under different subsets of the control variables, see Appendix H.
15 It should be noted, however, that this procedure comes at the cost of estimation accuracy because of the shorter estimation sample used in each of the rolling regressions.
16 Tables 20 and 21 in the Appendix J report the estimation results with a 80/20 income share ratios for the full and the 2000–2016 sample.
17 In addition, Appendix H shows that the negative (positive) effect of Low10 on FRVS (MVS) remains statistically significant at various specifications.
18 Additionally, we ran all these estimations using the Low20 as a right-hand side variable finding similar, but less robust results. These estimations can be found in Tables 22 through 25 in Appendix J.
Additional information
Notes on contributors
Christian R. Proaño
Christian Proaño is Professor of Economics at the University of Bamberg, Germany, and a research fellow of the Centre of Applied Macroeconomic Analysis (CAMA) at the Australian National University. He received his doctorate in 2008 from Bielefeld University, Germany, and was an Assistant Professor of Economics at the New School for Social Research from 2010 until 2014. His main fields of research are behavioral macroeconomics, monetary policy, macrofinancial stability and income inequality. His work has appeared in Journal of Applied Econometrics, Journal of International Money and Finance, Journal of Economic Dynamics and Control, Journal of Economic Behavior & Organization, Macroeconomic Dynamics, Metroeconomica, and Structural Change and Economic Dynamics, among others.
Juan Carlos Peña
Juan Carlos Peña is a research associate in the Institute of Economics at the University of Bamberg. He received his Ph.D. in Economics from the University of Bamberg in 2022 within the Promotionskolleg (graduate school) PK 045 funded by the Hans-Böckler Foundation. His research focuses on economic growth, income inequality and distribution.
Thomas Saalfeld
Thomas Saalfeld is Professor of Comparative Politics at the University of Bamberg, Germany. His work focuses on legislative organization, democratic representation and cabinet survival in European democracies. In his recent publications, he studied the effect of ideological polarization on cabinet formation and duration in European parliamentary democracies. His work was published in the British Journal of Political Science, the European Journal of Political Research, International Studies Quarterly, The Journal of Legislative Studies, Legislative Studies Quarterly, Politische Vierteljahresschrift, Rivista Italiana di Scienza Politica, Parliamentary Affairs and West European Politics, among others. With Claudia Landwehr and Armin Schäfer he recently edited a series of analyses of problems of representation and polarization in Europe and the United States (Contested Representation, Cambridge University Press, 2022).