Inflation doesn’t just hurt wallets—it shifts votes. New research by Jonathan Federle, @cathrinmohr.bsky.social, and @schularick.bsky.social finds that "inflation surprises" boost support for extremist, populist parties. Let’s unpack these findings. 🧵 #EconSky @kielinstitute.bsky.social 1/10 - ThreadSky

fabiosabatini.bsky.social • 159 days ago

Inflation doesn’t just hurt wallets—it shifts votes. New research by Jonathan Federle, @cathrinmohr.bsky.social, and @schularick.bsky.social finds that "inflation surprises" boost support for extremist, populist parties. Let’s unpack these findings. 🧵 #EconSky @kielinstitute.bsky.social
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fabiosabatini.bsky.social•159 days ago

What are "inflation surprises"? 🤔 They’re unexpected spikes in inflation that catch voters off guard. In 2024, 41% of Americans viewed inflation as a major issue. Notably, those concerned with inflation were more likely to be Trump supporters.
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https://www.ifw-kiel.de/publications/inflation-surprises-and-election-outcomes-33533/

fabiosabatini.bsky.social•159 days ago

How does unexpected inflation affect voting? Federle, Mohr, and Schularick use a new dataset covering 76 years, 18 countries, and 365 elections to dig into this relationship. Their findings? Inflation surprises lead to a notable shift away from mainstream parties.
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fabiosabatini.bsky.social•159 days ago

Specifically, an inflation surprise of 10 percentage points results in a 15% increase in extremist party vote share—about 1.7 percentage points. To put it in perspective, that’s larger than the effect of a systemic financial crisis, which is around 1.6 percentage points.
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fabiosabatini.bsky.social•159 days ago

But why does inflation provoke such a political shift? 🤔 Inflation erodes purchasing power. People feel wages don’t keep up, and lower-income households suffer the most.
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fabiosabatini.bsky.social•159 days ago

According to Alberto Binetti, Francesco Nuzzi and @s-stantcheva.bsky.social, the fall in purchasing power boosts a sense of unfairness that can lead to social anger, resulting in support for more extreme options. 📉💸
@nberpubs.bsky.social
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https://www.nber.org/papers/w32497

fabiosabatini.bsky.social•159 days ago

Federle and colleagues show that this political effect is strongest when real wages fall. When people see their wages stagnate while prices rise, they often abandon mainstream parties and turn to extremist options as a protest against the status quo.
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jacobedenhofer.bsky.social•120 days ago

📌

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