idw – Informationsdienst Wissenschaft
Nachrichten, Termine, Experten
Nachrichten, Termine, Experten
Both unexpectedly high inflation and weak economic growth significantly boost the electoral performance of extremist and populist parties, according to a recent study by the Kiel Institute. The main reason for this is a decline in real wages in the face of negative economic surprises. The evidence helps to explain the success of Donald Trump in the US and of far-right and far-left parties in Europe. In Germany’s snap election in February, recent economic problems alone likely account for about 2 percentage points in the vote shares for the far-right AfD and the left-wing populist BSW.
The study also shows that solid economic and real wage growth cushion the shock of higher-than-expected price increases, reducing the inflation effect on the vote shares of radical parties.
The study Inflation Surprises and Election Outcomes (https://www.ifw-kiel.de/publications/inflation-surprises-and-election-outcomes-3...) examines 365 elections in 18 industrialized countries between 1948 and 2023. It finds that an inflation surprise of 10 percentage points over the course of a legislative period leads to a 2.8-percentage-point increase in the share of votes for populist and extremist parties in the next election, provided that it is paired with below-average real wage growth.
This is due to voters’ declining purchasing power as prices rise faster than incomes and savings. However, if wage increases compensate for the inflation shock, the increase in the vote share of radical parties is only 1.3 percentage points.
This result applies generally to times of unexpectedly higher inflation, such as the oil crisis of the 1970s or the price shock following the COVID19 pandemic. Numerous previous economic studies have shown that high inflation reduces electoral support for political incumbents.
The Kiel Institute study is the first to highlight the role of inflation surprises—the difference between actual inflation and inflation expectations a year earlier—and shows that extremist and populist parties benefit from voters switching allegiances as a result. It is an important contribution to the political and economic debate about the success of extreme parties.
“Our research contributes to our understanding of Trump's electoral success and the rise of extremists and populists in Germany and elsewhere. Radical politicians and parties benefit when price increases are higher than expected and economic agents do not have the opportunity to prepare for inflation by appropriately increasing wages,” said Jonathan Federle, researcher at the Kiel Institute and co-author of the study.
More demonstrations and protests
When inflation unexpectedly outstrips the growth of real wages, it not only affects voting behavior but also increases popular discontent. According to the study, inflation surprises have a significant impact on the frequency of demonstrations and strikes against government policies. The number of demonstrations increases by around 8 percent when actual inflation is one percentage point higher than previous inflation expectations.
Surprise changes to gross domestic product (GDP) also affect the support for populist and extremist parties. A sudden slump in growth increases support, while a welcome GDP surprise reduces it. When growth is one percentage point higher than previously expected, the share of votes for radical parties falls by around 0.25 points.
"The results provide an interesting insight into the upcoming elections in Germany, as inflation and growth have deviated significantly from expectations over the past three years. Overall, support for radical parties on the left and right is likely to have increased by 2 percentage points as a result," says Federle.
Read study here: https://www.ifw-kiel.de/publications/inflation-surprises-and-election-outcomes-3...
Media Contact:
Mathias Rauck
Chief Communications Officer
T +49 431 8814-411
mathias.rauck@ifw-kiel.de
Kiel Institute for the World Economy
Kiellinie 66 | 24105 Kiel | Germany
Chausseestraße 111 | 10115 Berlin | Germany
T +49 431 8814-1
E info@ifw-kiel.de
www.ifw-kiel.de
Dr. Jonathan Federle
Kiel Institute Researcher
jonathan.federle@ifw-kiel.de
Criteria of this press release:
Business and commerce, Journalists, Scientists and scholars
Economics / business administration, Politics, Social studies
transregional, national
Transfer of Science or Research
English
You can combine search terms with and, or and/or not, e.g. Philo not logy.
You can use brackets to separate combinations from each other, e.g. (Philo not logy) or (Psycho and logy).
Coherent groups of words will be located as complete phrases if you put them into quotation marks, e.g. “Federal Republic of Germany”.
You can also use the advanced search without entering search terms. It will then follow the criteria you have selected (e.g. country or subject area).
If you have not selected any criteria in a given category, the entire category will be searched (e.g. all subject areas or all countries).
