Local labour market conditions and electoral behaviour: An instrumental variable approach from Italy

What is the causal impact of local employment dynamics on electoral behaviour? We combine Italian labour market area-level data for four national elections (2008, 2013, 2018 and 2022) with a shift-share IV estimation design to identify how local labour market conditions, captured by changes in the employment rate, affect voter participation and incumbent support. Our baseline estimates show that a 1 p.p. drop in the employment rate yields a significant 0.76 p.p. increase in turnout and a 0.80 p.p. decline in incumbent vote share. Further analyses reveal crucial nuances. First, exploring mediation, we find that higher turnout in response to worsening labour market conditions accounts for roughly one-quarter of the total negative impact on incumbent support via a participation channel. Second, the effects appear driven entirely by adverse conditions: we find strong electoral reactions in areas actually experiencing employment declines, but no significant response where conditions improve, consistent with a protest voting framework. Third, while regional-national partisan alignment slightly moderates effect magnitudes, national accountability for economic performance largely dominates the local electoral reaction.