Does the Winner Take It All? Redistributive Policies and Political Extremism

Abstract

In this paper, we argue that regional heterogeneity of underlying fundamentals -such as economic history, geography or natural resources- can lead to extreme voting in federal systems of government. The outcome of higher-level (federal) policies often depends on these fundamentals, meaning some regions will always benefit from the policy whilst others lose out. In our model, voters have an incentive to stack this kind of redistribution in their favour, using the regional ties of politicians as a strategic link. The median voter therefore elects federal representatives that are extremely protective of their own region's interests. We find that the incentive to select such a tough negotiator survives the pressure to belong to the ruling coalition. We test our predictions by looking at the performance of parties at national and European Parliament elections since 1990. We indeed observe that such strategic voting behaviour is U-shaped on the "losing-winning from the policy" dimension. Our online survey provides further evidence.