Discussion Paper Details

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Title: The European Trust Crisis and the Rise of Populism

Author(s): Yann Algan, Sergei Guriev, Elias Papaioannou and Evgenia Passari

Publication Date: November 2017

Keyword(s): crisis, Europe, Immigration, industrial structure, populism, Trust and voting

Programme Area(s): Development Economics, International Macroeconomics and Finance, Macroeconomics and Growth and Public Economics

Abstract: We study the implications of the Great Recession for voting for anti-establishment parties, as well as for general trust and political attitudes, using regional data across Europe. We find a strong relationship between increases in unemployment and voting for non-mainstream, especially populist parties. Moreover, increases in unemployment go in tandem with a decline in trust in national and European political institutions, while we find much attenuated effects of unemployment on interpersonal trust. The correlation between unemployment and attitudes towards immigrants is muted, especially for their cultural impact. To advance on causality, we extract the component of increases in unemployment explained by the pre-crisis structure of the economy, in particular the share of construction in regional value added, which is strongly related both to build-up and the burst of the crisis. Our results imply that crisis-driven economic insecurity is a substantial driver of populism and political distrust.

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Bibliographic Reference

Algan, Y, Guriev, S, Papaioannou, E and Passari, E. 2017. 'The European Trust Crisis and the Rise of Populism'. London, Centre for Economic Policy Research.