Toxic Loans and the Rise of Populist Candidacies

80 Pages Posted: 9 Aug 2018 Last revised: 14 Jan 2022

See all articles by Emilie Sartre

Emilie Sartre

Brown University - PTP

Gianmarco Daniele

University of Milan - Faculty of Law; Bocconi University

Paul Vertier

affiliation not provided to SSRN

Date Written: September 15, 2021


The role of financial crises in boosting populism has been well documented. Yet the specific mechanisms through which this occurs remain elusive. This paper studies how populist candidacies were fueled by a public financial scandal, triggered by market volatility and financial deregulation. Using an instrumental variable strategy, we exploit the leak of a list of French municipalities which contracted “toxic” loans prior to the crisis as a source of identification. During the subsequent municipal elections, we show that i) populist parties were the main political parties experiencing an increase in vote share, while the incumbent’s political party was electorally punished, ii) both far-right and far-left populist candidacies were more likely in municipalities affected by the scandal, leading to a rise in electoral competition, iii) for the populist far-right, these results were stronger in economically fragile municipalities and in cities with a higher growth of the immigrant population. Importantly, the findings are not driven by the economic aftermath of the scandal and suggest that public finance mismanagement disclosure contributes by itself to the rise of populism during financial crises.

Keywords: Populism, Financial crisis, Candidates, Extreme, Far right, Far left, Instrumental Variable Strategy, Municipalities, French elections

JEL Classification: P16, D72, P48, P43

Suggested Citation

Sartre, Emilie and Daniele, Gianmarco and Vertier, Paul, Toxic Loans and the Rise of Populist Candidacies (September 15, 2021). Available at SSRN: or

Emilie Sartre (Contact Author)

Brown University - PTP ( email )

Box 1860
Providence, RI 02912
United States

Gianmarco Daniele

University of Milan - Faculty of Law ( email )

Via Festa del Perdono, 7
20122 Milano

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136

Paul Vertier

affiliation not provided to SSRN

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