Learning, Political Attitudes and the Crisis in Transition Countries

We estimate the impact of the recent economic crisis on support for democracy and a free market economy in 30 post transition countries and five western European countries. Political values are cyclical and reflect a learning process. Support for the market and democracy has decreased between 2006 and 2010 in countries that were hit the hardest and that were the most advanced on the path to liberal reform, and notably new EU members. By contrast, it has increased in the CIS. This last result is driven by the young and unemployed. Although individual exposure to the crisis is associated with lower average support to democracy and markets, it leads these segments of the population, which were most excluded from the political-economic system in place to demand more liberal reforms in countries with corrupt institutions and that lag behind in terms of economic and political reform. We rely on individual level, within-country variation and on the use of a large set of individual controls in order to identify the causal effect of the economic crisis on political attitudes