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Discussion Paper Details

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Title: From Finance to Fascism: The Real Effect of Germany's 1931 Banking Crisis

Author(s): Sebastian Doerr, Stefan Gissler, José Luis Peydró and Hans-Joachim Voth

Publication Date: March 2018

Keyword(s): extremism, financial crises, Germany, Great Depression, Nazi Party, Polarisation and Real effects

Programme Area(s): Economic History and Financial Economics

Abstract: Do financial crises radicalize voters? We study Germany's banking crisis of 1931, when two major banks collapsed and voting for radical parties soared. We collect new data on bank branches and firm-bank connections of 5,610 firms. Incomes plummeted in cities affected by the bank failures; connected firms curtailed payrolls. Nazi votes surged in locations exposed to Danatbank, led by a Jewish manager - but not in those suffering from the other bank's failure. Unobservables or pre-trends do not explain the results. Danatbank's collapse boosted Nazi support, especially in cities with deep-seated anti-Semitism, suggesting a synergy between cultural and economic channels.

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Bibliographic Reference

Doerr, S, Gissler, S, Peydró, J and Voth, H. 2018. 'From Finance to Fascism: The Real Effect of Germany's 1931 Banking Crisis'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12806