Let Them Eat Credit: Do Voters Care About Income Inequality?

• In Event: Credit Cycles, Inequality and Populism

Abstract

How do voters hold their governments accountable for the performance of the economy? Research on economic voting shows that voters tend to reward incumbents who preside over strong economies, while punishing those who don’t (Lewis-Beck and Stegmaier, 2013). While unemployment, growth, and inflation have been extensively studied, we know much less about whether voters punish incumbent politicians for rising income inequality. Is there a relationship between income inequality and the electoral success of the incumbent government, and if so, what explains its variations? It seems especially appropriate to ask these questions in new democracies, as such countries tend to have relatively low-informed voters, a lack of partisan and programmatic parties devoted to issues such as income equality, and they are also home to some of world’s most unequal societies. While dissatisfactions about widening economic disparities exist, I argue that citizens are less inclined to express these concerns at the ballot box if they have been “placated” by easy access to bank credit and finance, as bank loans enable citizens to conduct consumption smoothing, despite stagnating or low incomes, or even lack of collateral. In fact, recently scholarship posits that politicians found cheap credit to be a politically convenient way to quell dissatisfaction about the economy from the citizenry (e.g., Ansell and Ahlquist 2017). Using a large N study of national legislative elections in developing and democratizing countries, this paper tests: (i) whether income inequality is negatively associated with the vote share for the incumbent party (or party coalition) and (ii) whether the relationship is moderated/weakened by the presence of higher bank credit. Altogether, this paper explores an under-emphasized mechanism through which governments respond to voter concerns about economic outcomes.

Author

• Puspa D Amri, Sonoma State University