Economic Uncertainty and Divisive Politics: Evidence from the dos Españas

Abstract

This article exploits two newspaper archives to track economic policy uncertainty in Spain in 1905-1945, a period of extreme political polarization. We find that the outbreak of the civil war in 1936 was anticipated by a striking upward level shift of uncertainty in both newspapers. We study the dynamics behind this shift and provide evidence of a strong empirical link between increasing uncertainty and the rise of divisive political issues at the time: socio-economic conflict, regional separatism, power of the military, and role of the church. This holds even when we exploit variation in content at the newspaper level.
Published as: Economic Uncertainty and Divisive Politics: Evidence from the dos Españas in The Journal of Economic History , Vol. 81, No. 1, 40 - 73, March, 2024