Risking Peace: The Effects of Financial Market Exposure on Votes and Political Attitudes

Date
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Speaker

Saumitra Jha, Associate Professor of Political Economy, Stanford University

 

Abstract
Conflict tends to harm the economy, but voters may not fully internalize these risks. Can exposure to broader financial markets change attitudes towards conflict, and even voting decisions? Can this happen even in the context of persistent ethnic conflict? Prior to the 2015 Israeli elections, we randomly assigned financial assets to likely voters and gave them incentives to actively trade for up to seven weeks. These assets included stocks of Israeli and Palestinian companies with randomly assigned divestment dates and initial endowments. 
 
We find that this financial market exposure caused systematic shifts in voting behavior and support for policy concessions to achieve peace. There is little evidence that the effects reflect changes in voters' political information, overall wealth, or changes in well-being. Instead, we find evidence consistent with financial market exposure changing both individuals' evaluation of the risks to the broader economy due to peace and conflict, and their evaluation of national policy platforms. Importantly, these effects are larger for the risk averse, who otherwise tend to support status quo policies, and for inexperienced investors. In fact, the votes of inexperienced investors become more aligned with experienced investors that already support platforms favoring concessions for peace.

 

Biography

Saumitra Jha's research focuses on drawing new lessons from economic theory and history for fostering beneficial political reform and economic growth in developing societies. He is particularly interested in the role that can be played by organizational innovations in mitigating political risk, encouraging political reform and supporting peaceful co-existence between members of different ethnic, religious and social groups. His current work focuses on understanding the potential and limitations of four particular types of such organizational innovation in mitigating conflict and creating broad coalitions. These include (a) the role of financial innovations and markets, (b) the role of organizations developed to enhance historical inter-ethnic trade, (c) the potential of non-violent civil disobedience and (d) the effects of organizational skills acquired through war in fostering political reform. Saumitra has a particular interest in understanding the challenges and lessons of the South Asian experience.