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Economic Shocks and Populism: The Political Implications of Reference-Dependent Preferences
2023-04-21
Time: 4:00 pm-5:30 pm, Apr. 21st, 2023
Platform: Zoom
Speaker: Nicola Pavoni
(Bocconi University)
Link: https://zoom.us/j/96990174936?pwd=ejhZazZqRFZLa2duWXlXZ3B2K2ludz09
Meeting ID: 969 9017 4936
Passcode: inse
Abstract:
This paper studies electoral competition over redistributive taxes between a safe incumbent and a risky opponent. With reference-dependent preferences, economically disappointed voters become risk lovers, and hence are attracted by the more risky candidate. We show that, the equilibrium can display policy divergence: the intrinsically more risky candidate proposes lower taxes and is supported by a coalition of very rich and very disappointed voters, while the safe candidate proposes higher taxes. This can explain why new populist parties are often supported by economically dissatisfied voters and yet they run on economic policy platforms of low redistribution. We show that survey data on the German SOEP are consistent with our theoretical predictions on voters’ behavior.
Speaker:
Professor Nicola Pavoni is a full professor of economics at Bocconi University. His research interests range from macroeconomic theory, economics of information, public finance, consumption theory, labor economics and behavioral economics. His work has been published in Econometrica, the American Economic Review, the Review of Economics Studies, the Journal of Economic Theory, the Journal of Monetary Economics, the Journal of the European Economic Association, and the International Economic Review among others. He obtained his PhD degree in economics from University Pompeu Fabra in 2000.