The Political Consequences of Household Wealth Shocks: Evidence from Italy

How do adverse shocks to household wealth influence domestic politics? Household wealth has become increasingly salient because rising financialization has increased risks to many households. Wealth shocks can undermine support for mainstream parties that have converged on policies perceived as contributing to the shocks, compounding rising anxiety in the squeezed middle class. This paper makes use of data on household income and wealth in Italy, assessing how developments in the levels and distribution of household wealth, leverage, and financial vulnerability have promoted voting for populist parties since 1992. Results suggest that financial distress is indeed connected to populist voting. Wealthier parts of the electorate are more invested in the status quo, supporting parties that have demonstrated their commitment to fiscal and monetary orthodoxy. Nonetheless, some exposure to financial risk, such as share ownership or high levels of leverage, seem to push voters towards populist parties.