There is a rapidly growing empirical literature on the causes of the recent rise of populism in Western countries, but much less is known about solutions. This column, part of the Vox debate on populism, shows that in areas facing similarly adverse economic shocks, the exposure to the EU regional redistribution policy has helped lowering the support for populist parties. This suggests that, at least in the short term, fiscal policy can be an effective tool against the populist backlash.
This column is a lead commentary in the VoxEU debate on “Populism“
Looking for the causes of populism in Western countries, a recent but rapidly growing literature points to explanations related to economic factors (Colantone and Stanig 2019, Guiso et al. 2017, Guriev 2018). Economic shocks like import competition from low-labour-cost countries, robotisation, and the Great Recession, among others, increased economic insecurity that, in turn, translated in larger support for populist parties. The main policy implication is that social sustainability calls for appropriate redistributive policies aimed at alleviating economic difficulties (IGM Forum 2019). Nevertheless, very little is known about the effectiveness of such policies in reducing populism.
Do transfers affect populist voting?
In Albanese et al. (2019), we contribute to this debate by analysing the role of redistribution across territories. In fact, spatial inequality appears to be a relevant dimension when it comes to identifying winners and losers from recent economic shocks (Rodríguez-Pose 2018). We study EU regional policy during the 2007–2013 programming period. The lion’s share of funds went to the regions with per capita GDP under the threshold of 75% of the EU average (Convergence Objective status). Our empirical analysis focuses on 2013 general elections held in Italy, one of the frontline countries facing the rise of populism. In this country, five out of 20 NUTS-2 regions (all in the South: Basilicata, Calabria, Campania, Puglia and Sicily) formed part of the Convergence Objective (Figure 1); the rest received much less money (within the Competitiveness and Employment Objective).
Figure 1 Convergence Objective regions in Italy, 2007-2013
Similar places, different amounts of EU transfers
We compare municipalities near the border that separates the two regimes by means of a (sharp) spatial regression discontinuity design. Since eligibility for EU objectives is defined at the regional level, at a more granular geographical level we can find places that are very similar but differentially exposed to redistribution. In particular, municipalities on the southern side are exposed to the generous Convergence Objective programme, while those on the northern side are not. Panel A of Figure 2 shows the geographical pattern of the average per capita/year EU spending around the border before the 2013 elections; the horizontal axis records the distance from the border that becomes positive when crossing the border from North to South. As expected, Convergence Objective municipalities received a substantial amount of funding, while the other cities are less covered by transfers. At the threshold, the difference is €125 per capita/year. However, municipalities on both sides are very similar in terms of many geographical and socioeconomic characteristics (plant density, unemployment rate, ageing index; Figure 2, Panels B-D) and, notably, in their exposure to many shocks related to the populist backlash: trade shocks, the euro shock, immigration, fiscal austerity, robotisation (Figure 2, Panels E-I).
Figure 2 Impact of Convergence Objective treatment on funds and balancing properties
From visual correlation to causation
Did exposure to the Convergence Objective programme have an impact on the vote for populists? We measure populism using Inglehart and Norris’s (2019) populism scores and then map the respective populist parties’ vote shares in respective municipalities. Overall, in our sample the resulting populist vote share equals 54%. Regression discontinuity estimates indicate that crossing the border from North to South is associated with a significant decrease in political preferences for populism. The size of the estimated impact is rather large. In our sample, the average populist vote share drops by about 2.5-3 percentage points as a consequence of the Convergence Objective treatment.
Figure 3 Impact of Convergence Objective treatment on populist vote share
We also highlight a number of additional findings:
First, following Inglehart and Norris (2019), our measure of populism summarises two cleavages:
The anti-establishment/anti-elite ideology, which considers society to be ultimately separated into two homogenous and antagonistic groups – the ‘pure people’ vs the ‘corrupt elite’ – and argues that politics should be an expression of the will of the people.
The authoritarian belief in a strictly ordered society, in which infringements of authority are to be punished severely.
In our empirical investigation, only the first reflects redistribution.
Second, we find that EU transfers also decrease voter turnout. The effect is very large, at 9 percentage points.
Finally, we find that EU funds have the same effect, irrespective of the specific channels – investment- or consumption-oriented – through which they are injected into local communities.