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Journal of Finance Vol. 77 No. 6 2022

Financial Crises and Political Radicalization: How Failing Banks Paved Hitler's Path to Power

Sebastian Doerr1,2,3,4,5,6,7,8,9,10; Stefan Gissler1,2,3,4,5,6,7,8,9,10; José-Luis Peydró7; Hans-Joachim Voth1,2,3,4,5,6,7,8,9,10

1 New School · 2 Federal Reserve · 3 University of Zurich · 4 Federal Reserve Board of Governors · 5 HEC Paris in Qatar · 6 Substance Abuse Free Environment · 7 Imperial College London · 8 Bank for International Settlements · 9 Universidade Nova de Lisboa · 10 HEC Paris

Abstract

Do financial crises radicalize voters? We study Germany's 1931 banking crisis, collecting new data on bank branches and firm‐bank connections. Exploiting cross‐sectional variation in precrisis exposure to the bank at the center of the crisis, we show that Nazi votes surged in locations more affected by its failure. Radicalization in response to the shock was exacerbated in cities with a history of anti‐Semitism. After the Nazis seized power, both pogroms and deportations were more frequent in places affected by the banking crisis. Our results suggest an important synergy between financial distress and cultural predispositions, with far‐reaching consequences.

DOI
10.1111/jofi.13166
Volume
77
Issue
6
Pages
3339-3372
Language
en
Sources
bibtex:phds-export.bib openalex openalex crossref

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