Financial Crises, Polarization, and Inequality

Project Description

Aims and Central Research Question

We aim to understand how financial crises affect political polarization and economic inequality. We study how societies mobilize in the aftermath of financial stress, and how policy responses affect economic inequality and polarization.
In order to do so, we investigate

1. different types of financial crisis and their effects;
2. how fiscal and monetary anti-crisis measures affect economic inequality and political polarization; and
3. how social conflict and mobilization are triggered by policy responses, by national governments as well as international institutions such as the European Union and the International Monetary Fund.

Background

In the wake of the global financial crisis, political polarization is on the rise. Therefore, we must learn to better understand the link between economic crises, policy responses, economic inequality, and political polarization. Anti-crisis policies interact with inequality and polarization in many and complex ways. They have been studied extensively by both economists and political scientists – but largely in isolation of each other. We will use our complementary areas of expertise to develop a politico-economic theory to help us understand the interrelationship between financial crises, political polarization, and economic inequality . And we will conduct systematic empirical tests using economic and political data.

Methods

We use a broad range of appropriate empirical methods, ranging from longitudinal models over time series approaches to detailed case studies. To arrive at theoretical predictions, we develop a dynamic general equilibrium framework, in which we explicitly account for the macroeconomic and distributional consequences of the interplay between politics and economics. This theoretical framework serves as a laboratory to conduct counterfactual policy experiments, and to perform welfare analyses.

Disciplines

Political Science, Economics

Starting Date

1 October 2019