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Ulric B. and Evelyn L. Bray Social Sciences Seminar

Wednesday, May 1, 2019
4:00pm to 5:00pm
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Baxter B125
The Subprime Mortgage Crisis and the Tea Party Movement: Evidence from Nationwide Campaign Finance and Real Estate Transactions
Zhao Li, PhD Candidate in Political Economics, Stanford Graduate School of Business,

Abstract: Existing literature suggests that extremist politicians gain votes following economic shocks, with potentially troubling policy implications. To test whether campaign donors in the U.S. respond similarly, I link nationwide campaign finance and real estate transactions to examine how localized exposure to the subprime mortgage crisis affected Republican donors' support for Tea Party candidates, who opposed government relief for distressed homeowners. Preliminary difference-in-differences findings include: 1) Republican donors in neighborhoods where foreclosure rates spiked donated less to Tea Partiers, but not to other GOP candidates; 2) this is inconsistent with economic self-interest as few donors were at risk of mortgage default; and 3) consistent with in-group bias, donors in distressed neighborhoods disproportionately rejected Tea Partiers when donors' neighbors were predominantly white. Because campaign donors have different lived experiences during economic shocks than the rest of the nation, donors may provide distinct electoral incentives in times of economic distress.

For more information, please contact Sabrina Hameister by phone at 626-395-4228 or by email at [email protected].