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Betrayed by the elites: how corruption amplifies the political effects of recessions

Author

Listed:
  • Carlos Sanz

    (Bank of Spain)

  • Albert Solé-Ollé

    (University of Barcelona & IEB)

  • Pilar Sorribas-Navarro

    (University of Barcelona & IEB)

Abstract

We investigate whether corruption amplifies the political effects of economic crises. Using Spanish municipal-level data and a difference-in-difference strategy, we find that local unemployment shocks experienced during the Great Recession (2008-2015) increased political fragmentation. This effect was four times larger in municipalities exposed to malfeasance than in municipalities without a history of political corruption. We bolster this evidence by showing that, conditional on province and population-strata fixed effects, there is no evidence of differential pre-trends. We also find that the interaction of unemployment and corruption harms the two traditional main parties and benefits especially the new party on the left (Podemos).

Suggested Citation

  • Carlos Sanz & Albert Solé-Ollé & Pilar Sorribas-Navarro, 2020. "Betrayed by the elites: how corruption amplifies the political effects of recessions," Working Papers 2020/02, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2020-02
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    File URL: https://ieb.ub.edu/publication/2020-2-betrayed-by-the-elites-how-corruption-amplifies-the-political-effects-of-recessions/
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    Citations

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    Cited by:

    1. Eduardo Gutiérrez & Enrique Moral-Benito & Roberto Ramos & Daniel Oto-Peralías, 2020. "The spatial distribution of population in Spain: an anomaly in european perspective," Working Papers 2028, Banco de España.
    2. Morelli, Massimo & Giommoni, Tommaso & Nicolò, Antonio, 2020. "Corruption and Extremism," CEPR Discussion Papers 14634, C.E.P.R. Discussion Papers.
      • Attila Gaspar & Tommaso Giommoni & Massimo Morelli & Antonio Nicolò, 2021. "Corruption and Extremism," BAFFI CAREFIN Working Papers 21163, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    3. Maria Teresa Balaguer‐Coll & Isabel Narbón‐Perpiñá & Jesús Peiró‐Palomino & Emili Tortosa‐Ausina, 2022. "Quality of government and economic growth at the municipal level: Evidence from Spain," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 96-124, January.
    4. Miguel Ángel Borrella-Mas & Martin Rode, 2021. "Love is blind: partisan alignment and political corruption in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(3), pages 423-451, September.
    5. Giommoni, Tommaso & Morelli, Massimo & Nicolò, Antonio, 2020. "Corruption and Extremism," CEPR Discussion Papers 14634, C.E.P.R. Discussion Papers.
      • Attila Gaspar & Tommaso Giommoni & Massimo Morelli & Antonio Nicolò, 2021. "Corruption and Extremism," BAFFI CAREFIN Working Papers 21163, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    6. Giommoni, Tommaso, 2021. "Exposure to corruption and political participation: Evidence from Italian municipalities," European Journal of Political Economy, Elsevier, vol. 68(C).
    7. Iván Arribas & Emili Tortosa-Ausina & TingTing Zhu, 2021. "Optimal capital structure, model uncertainty, and European SMEs," Working Papers 2021/11, Economics Department, Universitat Jaume I, Castellón (Spain).
    8. Matteo Gamalerio & Massimo Morelli & Carlos Sanz & Albert Solé-Ollé & Pilar Sorribas-Navarro & Olle Folke & Johanna Rickne, 2020. "The Rise of New Political Parties in Western Democracies / El auge de nuevos partidos políticos en las democracias occidentales / L’ascens de nous partits polítics en les democràcies occidentals," IEB Reports ieb_report_2_2020, Institut d'Economia de Barcelona (IEB).

    More about this item

    Keywords

    Accountability; Corruption; Political Fragmentation; Economic Crisis;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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