Inequality Aversion, Populism, and the Backlash Against Globalization — by Lubos Pastor, Pietro Veronesi
Inequality Aversion, Populism, and the Backlash Against Globalization
Motivated by the recent rise of populism in western democracies, we develop a model in which a populist backlash emerges endogenously in a growing economy. In the model, voters dislike inequality, especially the high consumption of the “elites.” Economic growth exacerbates inequality due to heterogeneity in risk aversion. In response to rising inequality, rich-country voters optimally elect a populist promising to end globalization. Redistribution is of limited value in containing the backlash against globalization. Countries with more inequality, higher financial development, and current account deficits are more vulnerable to populism, both in the model and in the data. Evidence on who voted for Brexit and Trump in 2016 also largely supports the model.
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Document Object Identifier (DOI): 10.3386/w24900
via National Bureau of Economic Research Working Papers https://ift.tt/1j89DVY
August 13, 2018 at 02:17PM https://ift.tt/1aNsfVT https://ift.tt/1j89DVY https://ift.tt/2vF0fqZ