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Privatizations Spark Socialist Backlash: Evidence from East Germany's Transformation

Author

Listed:
  • Anselm Hager
  • Moritz Hennicke
  • Werner Krause
  • Lukas Mergele

Abstract

The fall of the Berlin Wall in 1989 brought the end of socialism, yet pro-socialist sentiment regained momentum surprisingly quickly across Eastern Europe. Why did voters move back to an ideology that was associated with unfree elections and lackluster economic performance? This paper points to the rushed privatization of East European economies as one plausible driver of the revival of socialist voting. Using micro-level data from East Germany, we show that firm privatizations led to a marked resurgence of the former Socialist Unity Party. We argue that this effect is likely due to perceived inequity: Socialist voting thrived whenever firms were sold to Western elites, which East Germans took as a sign that capitalism was not meritocratic.

Suggested Citation

  • Anselm Hager & Moritz Hennicke & Werner Krause & Lukas Mergele, 2022. "Privatizations Spark Socialist Backlash: Evidence from East Germany's Transformation," CESifo Working Paper Series 10030, CESifo.
    • Handle: RePEc:ces:ceswps:_10030
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    References listed on IDEAS

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    Keywords

    privatization; socialist backlash; structural change; democratization;
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