Turning discontent into votes: Economic inequality and ethnic outbidding

Abstract

Ethnic outbidding, where parties adopt ever more extreme positions to capture electoral advantage, has become an increasingly common practice among ethnic parties. As economic issues have often served as a catalyst for ethnic tension, increasing levels of economic inequality should lead parties to adopt more extreme positions in an attempt to outbid one another. Furthermore, as their economic and ethnic platforms will appeal to the same ethnically defined constituency, ethnic outbidding should be more effective where inequality is high. Using a sample of over 150 ethnonational parties in Europe between 2011 and 2017, this paper finds that inequality is linked to increasing ideological extremism along a number of policy dimensions. Employing local-level voting data for Romania and Slovakia, we show that higher inequality makes adopting a more ideological extreme position a more successful electoral strategy, especially where economic issues are ethnically salient.

Keywords

ethnic outbidding income inequality ethnic political parties elections

Ethnically based political parties are an important facet of political life in ethnically diverse societies around the world. In ethnically divided societies, ethnic representation is a way for minorities to realize political power, by allowing minority groups, even small ones, to have a party that represents their interests (Cohen, 1997; Lijphart, 1977). This process often gives rise to the politicization of ethnic divisions, starting an auction-like process wherein politicians create platforms and programs to “outbid” their opponents, taking increasingly extreme positions on ethnically relevant issues (Rabushka and Shepsle 1972; Horowitz 1985; Mitchell et al., 2009).The ethnic outbidding model of party competition in divided societies, whether coined in materialist (Rabushka and Shepsle 1972) or socio-psychological (Horowitz 1985) terms, expects that if the electoral market is fully segmented along ethnic lines, ethnic parties will seek to maximize their votes by adopting more radical positions than their competitors.

Ethnic outbidding in divided societies can have dire political consequences, ranging from the derailment of peace processes (Mitchell et al., 2009; Moore et al., 2014), the destabilization of democracy (Chandra 2005; Houle 2018), institutional decay (DeVotta 2005), terrorism (Boylan, 2016; Kydd and Walter, 2006), ethnic violence (Kendhammer 2010), and even inter-ethnic warfare (Brubaker and Laitin, 1998; Kaufman, 1996; DeVotta 2002; Bhavnani et al., 2009; Saikia 2015), culminating in the loss of countless lives. Despite the widely held view that outbidding has detrimental effects on diverse societies, it is very challenging to empirically study the outbidding process itself because such tactics occur between elites in the corridors of power. Although outbidding itself is very difficult to study, one implication of outbidding, ideological extremism, can be studied empirically using available quantitative data. Ideological shifts that occur often involve ethnic policies such as territorial and cultural autonomy, because ethnic parties, unlike mainstream parties, often make explicitly ethnic appeals in their party platforms. According to the outbidding model (Horowitz 1985), these parties have incentives to adopt extreme positions on these issues as a means of attracting voters from their ethnic group¹. In this article, we focus on the effects of economic inequality on ethnic parties’ ideologies as well as the combined effects of inequality and ideology on parties’ performances in local elections. As economic inequality is increasing across the globe (Permanyer and Smits, 2020), this could portend an increase in ethnic outbidding and its negative consequences such as ideological extremism by ethnic parties.

Recent research has shown that economic inequality strengthens ethnic identities (Higashijima and Houle, 2018), increases ethnic political cooperation (Stewart and McGauvran 2019), and support for ethnic parties (Houle et al., 2019). Further, ethnic parties often focus on economic issues, as the motivation behind ethnic parties stems from providing a tangible benefit to a specific group of people (Fearon, 1999), and ethnic party members often vote based on the assumption that ethnic parties will deliver benefits to group members (Birnir, 2006; Chandra, 2007; Ferree, 2011). Where economic inequality is linked to ethnic identity, parties that focus on economic issues will be motivated to take on increasingly extreme positions on ethnic issues since both their economic and their ethnic platform will appeal to the same, ethnically defined constituency. This research seeks to ask two related questions; does increasing inequality lead ethnic parties to take more extreme ideological positions, and does higher inequality make ideological extremism a more successful electoral strategy?

Why economic inequality increases ideological extremism

Increasing economic inequality can affect two factors associated with ideological extremism, the structure of ethnic identities, and the desire for benefits. Ethnicity creates politically relevant affiliations that are more important to individuals than class (Horowitz 1985), leading elites in many countries to make ethnic, rather than class-based appeals. However, economic inequality can affect the ethnicization of politics by affecting policy preferences, ethnic based bargaining, and reducing cross-pressure on voters.

Recent empirical research has shown that greater levels of inequality produce higher levels of ethnicization in politics (Huber and Suryanarayan, 2016). Increasing economic inequality can affect group-based policy preferences by creating differences in group needs, feelings of discrimination by other groups, and different attitudes towards distribution (Baldwin and Huber 2010). Furthermore, higher levels of inequality increase between-group animosity, which can lead to discriminatory policies of one (or more) groups against the others (Alesina et al., 2016). Such discriminatory policies can affect the preferences of different groups irrespective of their economic placement, and increase the salience of economically defined ethnic differences. Next, as Huber and Suryanarayan (2016) argue, inequality contributes to the increasing salience of ethnicity by making it easier for groups to organize bargaining. Inequality reduces the costs of committing to specific policy outcomes designed to benefit specific groups, which increases the likelihood of ethnic based organizing, increasing the likelihood of supporting an ethnic party (Houle 2015; Stewart and McGauvran 2019). Economic inequality also reduces cross-pressure, a potential situation where voters are conflicted between options that represent their ethnicity and those that represent their class, reduce the incentive for ethnic voting (Dunning and Harrison 2010), on voters. Thus, inequality can make ethnicity more salient, by reducing barriers to ethnic voting.

At the party level, the allocation of benefits produces strong incentives to limit the size of the group, or to define the group as narrowly as possible (Fearon, 1999). As inequality rises, the differences between ethnic groups become more defined (salient), which produces a situation where there is less potential economic spillover between ethnic groups, making it much more difficult for the recipients of those benefits to rapidly expand. Additionally, as inequality increases, it may become easier to target economic befits to that group (Houle et al., 2019).

At the individual level, increasing economic inequality shapes preferences for particular benefits by altering the nature of resource distribution. Alesina et al. (2016) finds that economic inequality often leads to political inequality along ethnic lines, which can increase animosity between ethnic groups, and can lead to discriminatory policies against specific ethnicities. Recent research has found that increasing economic inequality is strongly related to the under-provision of public goods (Baldwin and Huber 2010; Dincer and Lambert 2012; Alesina et al., 2014), moving allocation levels away from groups’ ideal point. This can produce a situation where higher levels of inequality can increase support for more narrowly targeting benefits to one’s ethnicity (Luttmer 2001), while decreasing support for such programs overall (Alesina and Glaeser 2004). Ethnic party leaders will attempt to benefit from this situation by taking more extreme positions, based on improving conditions for their own ethnic group, at the expense of others. In short, ethnic party leaders will engage in ethnic outbidding.

Why between group inequality makes ideological extremism a successful tactic

As inequality increases between different ethnic groups,² members of a given ethnic group will have greater incentive to support an ethnic political party, or a party that explicitly represents the interests of that ethnic community to the exclusion of others (Chandra and Metz, 2002). The outbidding models predict that ethnic parties will adopt extreme ideological positions so that they can distinguish themselves from rival parties (Rabushka and Shepsle 1972; Mitchell et al., 2009). Ethnic parties adopt this strategy because, unlike mainstream parties, they are limited in their ability to increase vote share by making appeals across ethnic lines, which often includes moderating policy preferences or targets (Gormley-Heenan and Macginty 2008; Mitchel et al. 2009; Zuber 2013). Recent research has concluded that increases in inequality are associated with increases in ethnic voting (Houle 2015; Stewart and McGauvran 2019), often driven by individuals turning to co-ethnic parties or candidates in an attempt to receive more focused benefits (Bratton et al., 2012). In fact, this research indicates that inequality is a much better predictor of ethnic political mobilization than either individual (Stewart and McGauvran 2019) or group-based resources (Cederman et al., 2011). Researchers have consistently found that the economic dimensions of competition gains importance relative to the ethnonational dimensions (for instance, see Zuber 2013), and that increases in economic inequality can make the ethnic dimension more salient (Esteban and Ray 2008), leading to greater electoral market segmentation (Vogt 2017), and greater motivation to support candidates that take more extreme positions (Zuber and Szöcsik 2015).

We posit that income inequality creates an environment where people are more receptive to extreme ideologies. Recent research has argued that increased inequality is linked to the rise of populist, radical right, and ethnonational parties (Han 2016; Engler and Weisstanner 2021; Stoetzer et al., 2021). This scholarship identifies several different channels through which higher levels of inequality could be producing a more receptive environment to ethnic outbidding. First, higher levels of inequality can provoke social disintegration and increase feelings of social marginalization (Gidron and Hall 2017, 2020). Second, higher inequality can intensify relative deprivation and increase the risk of ethnic social decline (Engler and Weisstanner 2021). Finally, inequality can lead to decreased trust in political elites, especially those entrenched in mainstream parties (Rooduijn 2018). On the one hand, ethnic parties are incentivized to take increasingly extreme positions to become legitimate alternatives to mainstream parties. On the other, higher levels of inequality produce an environment where extreme ideologies become more appealing to voters, causing ethnic outbidding to be a more successful electoral strategy. Based on the preceding discussion, we produce two testable hypotheses:

H1: Increasing inequality leads to higher levels of ideological extremism by ethnic parties.

H2: Higher inequality leads to increased vote share for candidates representing parties with more extreme ideological positions.

Data and methods

To examine the effects that changing inequality has had on party ideology, we employ party data from the Ethnic Party in Competition (EPAC) datasets (Zuber and Szöcsik, 2015; Zuber and Szöcsik 2019). Due to the need to identify changes over time, we exclude parties only included in a single round of the survey, which reduces our sample to 124 parties representing 67 ethnicities in 22 countries³. The EPAC data were collected in 2011 and 2017, based on expert surveys that measure the ethnonational (also called center-periphery or territorial) dimension of competition.

Our independent variable is the change in between-ethnic-group economic inequality. We measure inequality using the same formula as Cederman et al. (2011), and estimated a country level weighted average as employed in Houle (2015). Our measure of ethnic economic inequality is

Inequalit y_{ethnic} = \sum_{i = 0}^{n} π ({[\log ((g / G)]}^{2})

where π is the percentage of the population of a country represented by an ethnic group, g refers to the average income of members of that ethnic group, and G refers to the average income for that country excluding the ethnic group. We calculate discrete values at both time periods and then difference these values to measure the change in ethnic inequality between 2011 and 2015. A higher [lower] value represents countries where the economic divisions between average members of different ethnic groups increased [decreased] between 2011 and2015⁴.

We are interested in three ideological variables from the EPAC dataset, ethnonationalism, territorial autonomy, and cultural autonomy⁵. We select these variables because of the high degree of salience of each issue for parties in our sample. Ethnonationalism is salient in 95% of parties, while cultural and territorial autonomy were each salient in 75% of the parties in our sample⁶. Each of the ideology variables from the EPAC dataset is coded from 0 to 10 along an ideological scale. For instance, a party’s position on territorial autonomy ranges from “0” (strongly against territorial autonomy) to “10” (strongly in favor of territorial autonomy). This coding required us to fold the data as the ideological extreme points exist at the ends with the more moderate positions in the middle. As such, our new measures range from “0” representing a centrist position, to “5” representing parties that are at the extreme points of each measure. Our dependent variables are the difference in these measures between 2011 and 2015, with negative numbers indicating parties that took more moderate positions, and positive numbers representing parties that took more extreme positions.

We include both party and country level controls. Our party controls include party size, measured by the share of seats in the lower house of parliament controlled by the party, a dummy for whether the party was excluded from the governing coalition or was a member of a pre-electoral coalition, and whether there were other ethnic parties representing the same ethnic group in the election. The country level controls included are Gross Domestic Product (GDP) logged, Democracy score from the Polity IV dataset, a measure of ethnic fractionalization, and dummies for countries in Eastern Europe, with PR systems, presidential systems, and federal systems.

To test the effectiveness of ideological extremism in an electoral context, we employ data on Romanian and Slovak mayoral elections, a focus of recent quantitative analysis on ethnic party candidate performance (Stewart 2019; Stewart and McGauvran 2020). Romania and Slovakia have several features in common which make them excellent countries for our analysis. Ethnic Hungarians are the largest minority group in both countries, and both Romania and Slovakia having multiple ethnic parties representing the Hungarian community. Identifying the ethnic parties in each country is simple, as all ethnic parties mention the group they represent in the name of the party. In addition, Romania and Slovakia employ a simple plurality formula to elect mayors for the elections in our sample, which means that electoral rules are held constant in our models. As outbidding always involves several parties in relation to each other, we have omitted any election where only a single ethnic party candidate ran for office. This provides us with over 600 individual candidates for mayor in the 2012 and 2016 local elections in Romania and the 2010 and 2014 local elections in Slovakia who ran against at least one other candidate. The dependent variable is each candidate’s percent of the vote. We normalize the vote share by the size of the ethnic population to decrease the likelihood that the models are heavily driven by minority-majority enclaves, which could produce heteroskedastic errors. We employ the same independent variable, horizontal inequality, as the previous analysis.

For our models of mayoral outcomes, we include candidate incumbency, the size of the party’s co-ethnic population in a given municipality, municipal population (logged) and the number of co-ethnic parties competing in the election and whether the candidate was female as control variables. Due to data limitations, the analysis is restricted to ethnic Hungarian and German party mayoral candidates and candidates representing parties affiliated with the Roma, Ukrainians, and other small minority groups are excluded. We estimate the models using fixed effects regression with fixed effects for each election year and ethnic group.

Findings

We begin our analysis by examining 5-year trends in inequality and ethnic party ideology in 22 countries⁷. The relationship between economic inequality and ideology are presented in Figure 1. It is clear from this figure that the majority of parties in systems that experienced decreasing inequality moderated their positions, while the majority of countries in systems that experienced increasing inequality showed signs of becoming increasingly extreme. This monotonic relationship provides some evidence of the link between inequality and extremism, as increases in party ideological extremism are significantly more common in countries that experienced increasing economic inequality over this period.

Figure 1.

Differences in inequality and ethnic ideological position.

The results of our statistical models are presented in Table 1. Starting with ethnonationalism, we find that inequality is a significant predictor of increasing ideological extremism. This is consistent with previous literature, such as Connor (2007), who argues that ethnonationalism is simply a redundancy for nationalism, and elites may be motivated to increase nationalist sentiments as a diversionary tactic to discourage their citizens from recognizing inequality and mobilizing against it (Solt 2011). Ethnic party leaders may be motivated by these same forces to take increasingly more extreme ethnonational positions. Consistent with the outbidding model we find that increasing inequality is also a significant predictor of cultural autonomy. Finally, our findings indicate that inequality leads to more extreme positions on territorial autonomy. The effect of ethnic inequality on increasingly extreme positions on territorial autonomy is not surprising. A large body of literature has explored the relationship between ethnic inequality at the group level and secessionist movements (Cederman et al. 2011; Langer and Stewart 2013) going so far as to indicate that these can lead to violent ethnic conflict. Our findings here offer support to Hypothesis1; increased inequality leads to increases in ideological extremism by ethnic parties

Table 1.

The effect of income inequality and party ideology.

	Ethnonationalism	Cultural Autonomy	Territorial Autonomy
Inequality	2.970**	2.386**	2.270***
	(1.466)	(0.970)	(0.767)
Party Controls
Size	−0.032	−0.120	−0.088
	(0.166)	(0.101)	(0.089)
Excluded	−0.060	−0.107	−0.132*
	(0.110)	(0.065)	(0.073)
PEC	0.418**	0.124	−0.038
	(0.161)	(0.083)	(0.057)
Other ethnic parties	0.070	−0.030	−0.002
	(0.084)	(0.051)	(0.049)
Country Controls
GDP (logged)	0.039	0.018	−0.037**
	(0.046)	(0.026)	(0.016)
Polity	0.015	0.014	−0.002
	(0.017)	(0.012)	(0.007)
Ethnic	0.154	0.217	0.495***
Fractionalization	(0.352)	(0.218)	(0.187)
Eastern Europe	−0.241	−0.099	−0.308***
	(0.215)	(0.130)	(0.116)
PR system	0.044	0.063	0.150*
	(0.125)	(0.085)	(0.080)
Presidential	−0.183*	−0.096	0.039
	(0.098)	(0.066)	(0.053)
Federal	−0.469***	−0.227***	−0.035
	(0.166)	(0.082)	(0.066)
Constant	−1.816	−1.256	0.099
	(1.401)	(0.809)	(0.499)
Countries	22	22	22
Ethnic groups	67	67	67
N	124	124	124
R-squared	0.217	0.155	0.178

Note: Ordinary least squares estimates. Robust standard errors, clustered by country, in parenthesis.

*** p<0.01, ** p<0.05, * p<0.1.

We now turn to examining how inequality affects the success of parties that adopt more extreme ideological positions. The results of our analysis, presented in Table 2, provides strong evidence that in locations with higher levels of economic inequality, candidates that take more extreme positions on ethnic issues are expected to receive higher vote share. We find that this is the case for all three measures of ideological extremism. Our interactive models produce an expected relationship that indicates that in locations with low levels of economic inequality, ethnic parties that take extreme ideologies are likely to perform poorly. However, our models indicate that ethnic party candidates that take extreme ideological positions in areas with higher levels of inequality are likely to gain votes. For ease of interpretation due to the inclusion of interaction terms in the second set of models, we present the results graphically in Figure 2.

Table 2.

The effects of income inequality and party ideology on candidate performance.

	(1)	(2)	(3)	(4)	(5)	(6)
Ethnonationalism	0.050***	−0.326***
	(0.007)	(0.033)
Ethnonationalism*		0.989***
Inequality		(0.114)
Territorial autonomy			0.029***	−0.256***
			(0.005)	(0.027)
Territorial autonomy*				0.781***
Inequality				(0.091)
Cultural autonomy					0.069***	−0.232***
					(0.007)	(0.026)
Cultural autonomy*						0.658***
Inequality						(0.103)
Inequality	−0.294*	−7.820***	−0.523***	−7.096***	−0.562***	−5.825***
	(0.153)	(0.846)	(0.122)	(0.778)	(0.120)	(0.829)
Incumbent	0.307***	0.302***	0.330***	0.306***	0.313***	0.300***
	(0.012)	(0.010)	(0.010)	(0.010)	(0.010)	(0.010)
% Co-ethnic population	0.245***	0.312***	0.316***	0.310***	0.324***	0.313***
	(0.025)	(0.017)	(0.018)	(0.018)	(0.017)	(0.017)
Municipal population (ln)	−0.017***	−0.031***	−0.028***	−0.032***	−0.029***	−0.030***
	(0.005)	(0.004)	(0.004)	(0.004)	(0.004)	(0.004)
Other Co-ethnic candidates	−0.100***	−0.093***	−0.112***	−0.096***	−0.098***	−0.090***
	(0.019)	(0.009)	(0.009)	(0.009)	(0.009)	(0.009)
Female candidate	0.005	−0.018	−0.014	−0.018	−0.015	−0.017
	(0.016)	(0.013)	(0.013)	(0.013)	(0.013)	(0.013)
Constant	0.896***	3.040***	0.853***	2.800***	1.221***	2.508***
	(0.091)	(0.245)	(0.059)	(0.235)	(0.074)	(0.213)
N	931	931	931	931	931	931
Elections	4	4	4	4	4	4
R-squared	0.565	0.602	0.582	0.599	0.596	0.605

Note: Regression coefficients fixed effects linear regression, robust standard errors in parentheses.

DV: Percentage of the vote won by each candidate (normalized).

*** p<0.01, ** p<0.05, * p<0.1.

Figure 2.

Marginal Effects of Inequality and Ideological Extremism on Electoral Success.

These findings are consistent with what is to be expected given previous research on ethnic outbidding. Ethnic parties, and their candidates, that take extreme ideological positions are likely to succeed by exploiting the fears of their co-ethnics, but only when they are able to identify appropriate methods for rectifying their grievances (Moore et al., 2014). Economic inequality can accentuate both ethnic fears (Dincer and Lambert 2012; Langer and Stewart 2013) and also help ethnic groups identify possible solutions to their economic woes (Luttmer 2001). This enables ethnic parties to frame economic issues in ethnic terms, increases the difference between the preferences over economic policies of members of different ethnic groups (Houle, 2015), and makes parties that take more extreme positions more likely to benefit from increased economic inequality. In contrast, when economic inequality is low, ethnic voters will likely flock to parties that take more moderate positions on ethnic issues, as they are more likely to be included in power-sharing agreements (Mitchell et al., 2009). More moderate parties are likely to take more pragmatic positions on economic issues, and are more likely to produce particular benefits when economic inequality is low, making them more attractive to ethnic voters. Taken together, the results from Table 2 provide evidence for Hypothesis 2, that ethnic parties holding more extreme ideological positions are likely to do better when economic inequality is high.

Conclusion

The findings presented here, that economic inequality can increase extremism by ethnic parties, and even make extremism a viable electoral policy, provide another causal step in the relationship between inequality and ethnic conflict. Increasing levels of inequality, especially if it is class-based ethnic divisions, produces a situation where elites are incentivized to frame political divisions in increasingly polemic terms, taking more extreme ideological positions. Further, this electoral strategy will be rewarded as increasing economic inequality will make it more likely that both the economic and ethnic platform of ethnic parties will appeal to the same, ethnically defined constituency. As political elites take more extreme positions, they may be less likely to find inter-ethnic solutions to economic problems.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Correction (March 2025):

The article has been updated with correct dataverse link in the supplemental material section. For more details, please see the correction notice: .

ORCID iD

Ronald J McGauvran

Supplemental material

The files can be found at .

Notes

Appendix

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