Job creation, job destruction and voting behavior in Poland

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Abstract

This paper analyzes how job creation and job destruction affected voting in the Polish 1997 and 2001 parliamentary elections. We link the votes for the left-wing party to the unemployment rate and the job creation and destruction rates in a constituency, and show that the job destruction rate and unemployment rate had a positive effect on the votes for the SLD, while the job creation rate had a negative effect. We then look at the effect of the change in job creation and job destruction rates on the change in the votes for individual candidates. We find that incumbents from the former right-wing coalition received fewer votes if excess job reallocation had increased in their constituency. Job flows therefore significantly affected voting and the balance between positive and negative effects of reforms to a large extent determined the political outcome.

Introduction

In the 1940s, Joseph Schumpeter introduced the notion of creative destruction in his book, Capitalism, Socialism and Democracy. In his words: “The fundamental impulse that keeps the capital engine in motion comes from the new consumers' goods, the new methods of production and transportation, the new markets. [The process] incessantly revolutionizes from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact of capitalism.” (Schumpeter, 1942).1 This notion was reapplied at the beginning of the 1990s to a theory of Schumpeterian growth. There is now considerable evidence that the reallocation process contributes significantly to productivity growth.2 However, the process of creative destruction can also have important social consequences if workers are not reallocated smoothly from old to new jobs. If individuals have outdated skills, finding a new employer can difficult.

In the post-socialist transition countries, resources were allocated inefficiently and production processes were in many cases obsolete. When trade was liberalized and foreign investment permitted, firms lost market share and major restructuring programs were launched, leading to considerable job displacement. Transition inevitably led to winners and losers. An intense debate at the beginning of transition matched those who favored a big bang approach to reforms against those defending the more gradualistic approach (see Dewatripont and Roland, 1995). While the former stressed the windows of opportunity that allowed radical reforms, the latter focused on the importance of political constraints. In a democratic society, politicians are accountable for the consequences of reforms. Therefore, a big bang strategy that creates many losers can be considered as too painful to voters, who are likely to oppose further reforms. Gradualism is then a more viable strategy. On the one hand, new opportunities allowed the creation of new firms, which started developing new products. Yet individuals who lost their jobs were dissatisfied. When elections take place, winners and losers vote, with high levels of job destruction likely to imply votes for parties opposing fast reforms and high job creation underlying votes for reforming parties. This paper analyzes the effect of job creation and job destruction on the voting patterns in Poland during the 1997 and 2001 parliamentary elections. In September 2001, Poles voted massively for the socialists, ending four years of right-wing government. We test whether the economic deterioration between 1997 and 2001 played a role in explaining this result.

A small literature has investigated the effect of economic variables (influenced by economic reforms) on the voting behavior in transition countries but the literature has focused on unemployment or, more recently, on creation of new firms. Pacek (1994) finds evidence that voters punish incumbents whom they view as responsible for economic difficulties. High regional unemployment rates are negatively linked to the vote share in favor of parties associated with reforms, and positively linked to the vote percentage for the SLD during the 1991 Polish parliamentary elections. Similar results were found from the Bulgarian and Czechoslovak elections in the early 1990s. Powers and Cox (1997) argue that attitudes towards reforms and voting behavior also depend on how individuals understand founding events, i.e. moments decisive for a society. Individuals blaming the communist system were more likely to vote against the SLD, while individuals blaming the first wave reformers were more likely to vote for the SLD. However, satisfaction with reforms also had a positive effect on the votes for right-wing parties. Fidrmuc (2000) analyzes whether the consequences of economic reforms determine the political support for the reforming parties. In his paper, elections play the role of referenda on the speed of reforms, rather than rewards or punishments. He finds a strong and positive association between regional unemployment rate and votes for the left-wing parties opposing reforms. The level of entrepreneurial activity, or creating new employment opportunities, had the opposite effect, favoring the parties supporting further reforms. Jackson et al. (2003) argue that the creation of new firms was accompanied by the emergence of a part of society that supported reforms. They find evidence confirming this theory during the 1993 and 1997 Polish elections. More recently, Valev (2004) looked at the effect of unemployment on voting behavior in Bulgaria and found that, while high unemployment reduces the support for market reforms, unemployed people also appear to ask for more reforms in places where job opportunities are scarce. In other words, he argues that more than one dimension must be considered.

We assess the effect of measures conventional in labor economics but never used in studies of voting behavior. First, we link the votes for the left-wing party to the job creation and destruction rates at the regional level. Second, we look at the influence of the change in job creation and job destruction rates on the change in the votes for individual candidates. We find that job flows have a strong impact on voting patterns. In our regional analysis, we show that the job destruction rate and unemployment rate have a positive effect on the votes for the SLD, while the job creation rate has a negative effect. In our analysis of votes for individual candidates, we find that incumbents from the former right-wing coalition received fewer votes if excess job reallocation had increased in their constituency. Therefore, the balance between the positive and negative effects of reforms determine to a large extent the political outcome.

Section 2 briefly reviews the economic and political environment in Poland before the 2001 elections. Section 3 describes the different elements of our database, constructed from many different sources. Section 4 presents the empirical methodology, while Section 5 shows and discusses the results and their limitations. Section 6 concludes.

Section snippets

Economic and political situation in Poland

Poland had been considered as one of the most successful transition countries, being the first country to emerge from the transitionary recession as early as 1993, and enjoying strong real GDP growth rates pace since. Unemployment, which had been high in the mid nineties, was declining and reached a low in August 1998, falling briefly under 10%. In 2000 and 2001, however, Poland suffered dramatic slowdown: real GDP growth fell to only 1%, mostly due to a drop in investment activity.

Votes for individuals

The votes for each individual candidate at the 1997 and 2001 elections for the Sejm were made available online as part of the project “Political Transformation and the Electoral Process in Post-Communist Europe” at the University of Essex. The dataset provides the number of votes and whether the candidate was elected. The name of the candidate is associated to his constituency (okreg wyborczy) and his party. The database also provides information about the place of the candidate on the party

Votes by constituency

Our first specification tests the effect of job flows in constituency j on the share of the votes gained by political parties in a constituency j (Vp,j) during the 2001 elections. Our aim is simply to look at whether the economic situation in a region influences the votes for a given party, considered as one (absolute) dimension of the vote.

We use seemingly unrelated regressions (SUR) technique5

Votes by constituency

Results from the estimation of Eq. (1) are presented in Table 5. We see that job creation and job destruction rates have a strong impact on the votes for the SLD in the constituency. Job creation has a strong negative effect on the votes for the SLD, while lagged job destruction has a strong and positive effect. The lagged unemployment rate at the level of the voivodship also has a positive effect on the votes for the left. The share of population between 20 and 40 years old and the share of

Conclusions

We have linked the evolution of the labor market to votes for the left-wing party, and to the votes for candidates. In our regional analysis, we found that job creation had a negative effect on the votes for the left-wing party while job destruction had the opposite effect. A high unemployment rate was also associated with more votes for the left. This suggests that voters are more likely to vote for a new ruling party when the previous one has not delivered results in terms of new jobs. We

Acknowledgements

We are grateful to Frances Millard for providing the voting data. We also thank two anonymous referees, the guest editors, John Jackson and Jan Fidrmuc, and participants at the WDI-ZEI conference “Political Economy of Transitions: Job Creation and Job Destruction” and at IIIS, Trinity College Dublin for useful comments. All remaining errors are ours.

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