Economic Shocks, Opportunity Costs, and the Supply of Politicians

TL;DR

This study shows that economic shocks like job losses increase political participation by financially motivated individuals, leading to higher-quality candidates and highlighting the role of opportunity costs in political entry.

Contribution

It provides causal evidence that economic shocks influence the supply of politicians and improve candidate quality through a novel use of administrative data and mass layoff events.

Findings

Job loss increases likelihood of political candidacy and party membership.

Candidates induced by layoffs are positively selected on competence.

Unemployment benefits eligibility further boosts political entry.

Abstract

Adverse economic shocks are known to reshape voter behavior -- the demand side of politics. Much less is known about their consequences for the supply side: how such shocks affect who becomes a politician. This paper examines how job losses influence individuals' decisions to enter politics and the implications for political selection. Using administrative data linking political participation records to matched employer-employee data covering all formal workers in Brazil, and exploiting mass layoffs for causal identification, we find that job loss significantly increases the likelihood of joining a political party and running for local office. Layoff-induced candidates are positively selected on various competence measures, indicating that economic shocks can improve the quality of political entrants. The increase in candidacies is strongest among laid-off individuals with greater financial incentives from holding office and higher predicted income losses. A regression discontinuity design further shows that eligibility for unemployment benefits increases political entry. These results are consistent with a reduction in individuals' opportunity costs -- both in terms of reduced private-sector income and increased time resources -- facilitating greater political engagement.