The politics of unemployment and electoral fractionalization : empirical evidence from OECD countries on the "hostage voter" effect
Matakos, Konstantinos and Xefteris, Dimitrios (2011) The politics of unemployment and electoral fractionalization : empirical evidence from OECD countries on the "hostage voter" effect. In: 10th Conference on Research on Economic Theory & Econometrics, Milos, 10-14 Jul 2011 (Unpublished)Full text not available from this repository.
Official URL: http://www.aueb.gr/conferences/Crete2011/PhD/Matak...
The impact of unemployment on electoral outcomes has always been of interest for both researchers and politicians. In this paper, we study the e¤ect of unemployment on electoral fractionalization employing a multi-party model with two dimensions of choice (policy and ideology). We show that electoral fractionalization decreases as unemployment increases. In equilibrium, unemployed voters have stronger incentives to vote for the parties making the most popular policy promises (high public spending), despite potential ideological divergence. That is, they are held "hostages". We also test our hypothesis in a sample of OECD economies, from 1960-2007, using oil price shocks as an instrument for unemployment. The results yield statistically significant support for the "Hostage-voter" hypothesis. We find that an 1% increase in the unemployment rate is associated with a 2% decrease in fractionalization. Moreover, results are robust under many alternative specifications. This documented negative relationship between unemployment and electoral fractionalization, hints the possibility that dominant parties might have a stronger preferecne for policies aiming at fiscal discipline over unemployment reduction.
|Item Type:||Conference Item (Paper)|
|Subjects:||H Social Sciences > HB Economic Theory
J Political Science > JZ International relations
|Divisions:||Faculty of Social Sciences > Economics|
|Official Date:||14 July 2011|
|Status:||Not Peer Reviewed|
|Funder:||A.G. Leventis Foundation|
|Version or Related Resource:||Matakosy, Konstantinos and Xefteris, Dimitrios (2011). The politics of unemployment and electoral fractionalization : empirical evidence from OECD countries on the "hostage voter" effect. In: 2011 Summer School : Market Failure and Market Design. Louvain-la-Neuve, 23-26 May 2011.|
|Conference Paper Type:||Paper|
|Title of Event:||10th Conference on Research on Economic Theory & Econometrics|
|Type of Event:||Conference|
|Location of Event:||Milos|
|Date(s) of Event:||10-14 Jul 2011|
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