Inequality Aversion, Populism, and the Backlash Against Globalization

Pástor, Luboš and Pietro Veronesi
Authors registered in the RePEc Author Service: Lubos Pastor

No 13107, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Motivated by the recent rise of populism in western democracies, we develop a tractable equilibrium model in which a populist backlash emerges endogenously in a strong economy. In the model, voters dislike inequality, especially the high consumption of ``elites." Economic growth exacerbates inequality due to heterogeneity in preferences, which generates heterogeneity in returns on capital. In response to rising inequality, rich-country voters optimally elect a populist promising to end globalization. Equality is a luxury good. Countries with more inequality, higher financial development, and trade deficits are more vulnerable to populism, both in the model and in the data.

Keywords: Inequality; Populism; Globalization; Brexit; Trump (search for similar items in EconPapers)
JEL-codes: D72 F65 G11 G12 G18 P16 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-pke and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Related works:
Journal Article: Inequality Aversion, Populism, and the Backlash against Globalization (2021)
Working Paper: Inequality Aversion, Populism, and the Backlash Against Globalization (2018)
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