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Can An Economic Crisis Shift Attitudes From Socialism to Capitalism? Evidence From a Quasi Natural Experiment

Government and Institutions

While many socialist countries suffered from harsh economic crises, studying their impacts on economic and political attitudes is challenging because of the scarcity of reliable data in non-democratic contexts. We study a democratic socialist setting for which we have ample information on such attitudes: the Israeli kibbutzim. Exploiting an economic crisis that hit some kibbutzim more than others, we find that the crisis led to reduced support for leftist political parties. This effect persisted for over 20 years after the crisis had ended. The electoral movement we document was rooted in a rightward shift in economic attitudes, suggesting that economic crises may undermine socialist regimes by silently changing attitudes toward them. Uniquely to our setting, we can also study mechanisms of recovery from the crisis. First, we find that while a sharp debt relief arrangement restored trust in the leadership, it did not reverse the impact of the crisis on economic beliefs. Second, as part of their efforts to recover from the crisis, kibbutzim liberalized their labor markets. Analyzing the staggered shift away from equal sharing to market-based wages, we find that this labor market liberalization led kibbutz members to move further rightward in their political voting and economic attitudes.

wp2058.pdf (2.63 MB)
Ran Abramitzky
Netanel Ben-Porath
Victor Lavy
Michal Palg
Publication Date
January, 2024