The effect of economic conditions on voting for extreme parties

This thesis studies how local economic conditions affect the decision to vote for an extreme party. I collect Swedish municipal data and construct a panel data set for the years 1998 to 2014. Economic conditions are measured using municipal unemployment data whereas the vote share of the Sweden Democrats is the main dependent variable of interest. The empirical challenge in this study lies in that economic conditions are not randomly distributed between municipalities and it is therefore hard to provide causal evidence. This thesis uses a fixed-effects model to mitigate this issue and identification, thus, comes from variation in unemployment within municipalities over time. Results show that if unemployment increases by one percentage point the vote share increases between 0.16-0.49 percentage points on average for the municipality elections. For the general national elections, the results are smaller and an increase of unemployment with one percentage point increases the vote share with 0.096-0.20 percentage points on average