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From finance to fascism

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

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Do financial crises radicalize voters? We study Germany's banking crisis of 1931, when two major banks collapsed and voting for radical parties soared. We collect new data on bank branches and firm-bank connections of over 5,500 firms and show that incomes plummeted in cities affected by the bank failures; connected firms curtailed their payrolls. We further establish that Nazi votes surged in locations exposed to failing Danatbank, led by a prominent Jewish manager and targeted by anti-Semitic Nazi propaganda. Our results suggest a synergy between cultural and economic factors: Danatbank's collapse boosted Nazi support especially in cities with deep-seated anti-Semitism; and the Nazis gained few additional votes in cities exposed to collapsing Dresdner Bank, which was not the target of Nazi hate speech. Danat-exposed and non-exposed cities were similar in their pre-crisis characteristics and exhibited no differential pre-trends; firms borrowing from Danat had lower leverage before the crisis than other firms. Unobservables are unlikely to account for the results.

Keywords: Financial crises; banking; Great Depression; democracy; anti-Semitism (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 N20 P16 (search for similar items in EconPapers)
Date: 2018-03, Revised 2020-11
New Economics Papers: this item is included in nep-cdm, nep-cfn, nep-his, nep-mac, nep-pke and nep-pol
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Related works:
Working Paper: From Finance to Fascism (2020)
Working Paper: From Finance to Fascism (2020) Downloads
Working Paper: From Finance to Fascism (2019) Downloads
Working Paper: From finance to fascism: The real effect of Germany's 1931 banking crisis (2019)
Working Paper: From Finance to Extremism: The Real Effects of Germany's 1931 Banking Crisis (2018) Downloads
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