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

Anselm Hager, Moritz Hennicke, Werner Krause and Lukas Mergele

No 10030, CESifo Working Paper Series from CESifo

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.

Keywords: privatization; socialist backlash; structural change; democratization (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-his, nep-hme, nep-reg and nep-tra
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Working Paper: Privatizations Spark Socialist Backlash: Evidence from East Germany’s Transformation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10030

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