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Financial crises and political radicalization: How failing banks paved Hitler's path to power

Sebastian Doerr, Stefan Gissler, Jose-Luis Peydro () and Hans-Joachim Voth

No 978, BIS Working Papers from Bank for International Settlements

Abstract: Do financial crises radicalize voters? We study Germany's 1931 banking crisis, collecting new data on bank branches and firm-bank connections. Exploiting cross- sectional variation in pre-crisis exposure to the bank at the center of the crisis, we show that Nazi votes surged in locations more affected by its failure. Radicalization in response to the shock was exacerbated in cities with a history of anti- Semitism. After the Nazis seized power, both pogroms and deportations were more frequent in places affected by the banking crisis. Our results suggest an important synergy between financial distress and cultural predispositions, with far-reaching consequences.

Keywords: financial crisis; political extremism; populism; anti-Semitism; culture; Great Depression (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 N20 P16 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2021-11
New Economics Papers: this item is included in nep-fdg, nep-his, nep-mac and nep-pol
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