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Financial Inequality, Group Entitlements and Populism

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Document pages: 20 pages

Abstract: This paper shows how financial inequality and misbeliefs about group entitlements can increase the consensus for populist parties. Given a banking shock, traditional and populist parties propose alternative bailout policies, where short termism characterizes the populistic policy. The citizens vote by weighting both psychological and economic items, in accordance with wealth group features. Given the pros and cons due to financial inequality, the populists proposal is more likely to win the more misbeliefs about group entitlements are robust. Citizens vote for populists because “feels good to do it”, triggering a sort of “democratic rioting”. The theoretical framework seem to be consistent with several facts concerning the European Union.

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