The Effect of Economic Busts on Turning to the Right: Evidence from Brazil

• In Event: Political Economy of Populism

Abstract

When and how does economic hardship translate into authoritarian and conservative attitudes and behavior? The political turmoil that arose in the aftermath of the Great Recession led to a renewed interest in the different aspects of the causal link between changes in local and national economic conditions and political behavior (see Margalit 2019, Rickard 2020 and Rodrik 2020 for recent reviews). Nevertheless, the underlying mechanisms and the scope conditions of this relationship are still unclear.

In this paper, I argue that to understand how economic hardship affects political behavior three contextual aspects must be taken into account: the ideology of the incumbent, the extent to which citizens rely on governments for insurance and redistribution and predispositions. I use data from Brazil to show how these three factors interact with economic hardship to shape political behavior.

My identification strategy is inspired by previous research that computes the exposure of subnational regions to import shocks from China (e.g. Colantone and Stanig, 2018; Autor, 2020). More specifically, I propose a new type of Bartik instrument which measures the exposure of subnational regions to the variation in prices of all commodities (metal and non-metal) produced in Brazil. The exposure of municipalities to the abrupt drop in commodity prices that begun in 2011 varies according to the change in prices of each commodity and to each municipality’s local labor market specialization, which is computed based on the sectorial composition of the labor force in each municipality in 2010 (the baseline year).

I find that the abrupt drop in commodity prices that begun in 2011 reduced the vote share of left-wing parties and increased the support for right-wing parties in subsequent national elections. Furthermore, by matching electoral data with the Manifesto Project, I show that voters in affected municipalities prefer parties that defend the military, law and order measures as well as traditional morality. I then use survey data from diverse sources to show the effect of the commodity shock on attitudes. The analysis suggests that in municipalities more affected by the drop in commodity prices, conservative attitudes, such as support for death penalty and attachment to religion, experienced a surge. I find no evidence that the shock changes support for redistribution.

In order to test the heterogeneous effects of the three contextual factors mentioned above, I interact the commodity shock with incumbent ideology, presence of philanthropic institutions at the municipality level (a proxy for reliance on non-state providers of redistribution and insurance) and individual sociodemographic and attitudinal features (a proxy for predispositions). I find that contextual factors indeed matter. For example, mixed-race and white people respond to the shock very differently than black people.

References

Autor, David, David Dorn, Gordon Hanson, and Kaveh Majlesi. 2020. “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure.” American Economic Review 110(10): 3139–83.
Colantone, Italo, and Piero Stanig. “The Surge of Economic Nationalism in Western Europe.” : 25.
Margalit, Yotam. 2019. “Political Responses to Economic Shocks.” : 21.
Rickard, Stephanie J. 2020. “Economic Geography, Politics, and Policy.” Annual Review of Political Science 23(1): 187–202.
Rodrik, Dani. 2020. Why Does Globalization Fuel Populism? Economics, Culture, and the Rise of Right-Wing Populism. Cambridge, MA: National Bureau of Economic Research. http://www.nber.org/papers/w27526.pdf (November 27, 2020).

Author

• Paula Rettl, Bocconi University