Economic Insecurity and Political Stability : A Case for Growth-Targeting Systemic Vote

In the period after the break of the Great Recession a series of drastic changes in the political systems of many affected countries occurred: the predominant role of systemic parties in forming political outcomes was challenged and many previously non-systemic voices gained significant political power. A simplistic reading of this fact suggests that economic insecurity constitutes a general threat to political stability. In this paper we focus on the years before the Great Recession (1960-2007) and -- after addressing possible issues of endogeneity -- we present evidence from 22 OECD countries that contradicts this conclusion: when the economy is not in turmoil, there is a strong positive relationship between unemployment -- the major macroeconomic determinant of economic insecurity -- and electoral support for systemic parties. That is, democratic politics respond to increasing economic insecurity by enhancing the prospects of political stability and, consequently, economic prosperity and growth (Alesina et al. 1996)