Subsidies and Democratic Backsliding in the EU: Evidence From Hungary

• In Event: Backsliding in Central and Eastern Europe

Abstract

This paper studies attitudes and policy preferences following a large-scale, unconditional government spending program. In early 2022, Hungary’s conservative government implemented a large-scale spending program, paying out the country’s largest pension bonus and giving families a huge tax refund. Beyond the size of the payment, these measures are of particular interest because they provided unconditional cash transfers to a large share of voters, and were structured in ways that rewarded relatively better off Hungarian citizens. How do these benefits affect citizens’ political participation and party preference? How do the mass public view the appropriateness of supporting a party based on material subsidies? Combining original survey data with administrative data collected right after Hungary’s April 2022 parliamentary elections, we show that Hungarians generally believe that voting for Fidesz because of subsidies was inappropriate, but also that most Hungarians believe that it affected others’ vote choices. These subsidies were particularly effective among rural and low-income voters, and may have swung the election in Fidesz’s favor.

Hungary is an important case for studying democratic backsliding within Europe, and the Fidesz government’s decision to implement this spending package came at a politically important moment, just prior to the country’s April 2022 parliamentary elections. These elections were held under difficult economic conditions. Rising interest rates, surging basic goods inflation, and rising energy prices were exacerbated by Hungary’s lack of access to EU funds due to rule of law concerns. At the same time, Russia’s invasion of Ukraine just a few months before the elections appeared to upend Hungarian Prime Minister Viktor Orbán’s reelection campaign, forcing him into the awkward position of having to explain his decade-old economic and political relations with Russian President Vladimir Putin. In addition, for the first time since 2010, Orbán’s opposition (socialists, greens, liberals, former far-right parties) was running together in the elections, which—given the specificities of the Hungarian electoral system—gave them the best chance in over a decade era to defeat the Fidesz-led government.

The 2022 Fidesz spending package was unconventional in that it was comprised of programmatic economic policies delivered to beneficiaries without regard to their political orientations or support for the incumbent government, but these policies nevertheless explicitly targeted key elements of the ruling Fidesz party’s mass base. We focus on two elements of the spending package. The first of these, the extra month of pension payment (called “13th month pension”), targeted older voters. The second of these, called the “family tax refund,” targeted families with children. The coverage of the programs was exceptionally large: 25% of voters (around 1.9 of 7.6 million) were eligible for family tax refund, and another 25% of voters (2 million pensioners) were eligible for the 13th month pension.

To advance our understanding about the effect of the transfers on voters and on their partisanship, we compare the party preferences of subsidy recipients with non-subsidy recipients. More precisely, we analyze whether transfers mobilized new voters, demobilized opposition supporters, or swayed the party preference of some recipients. As the policies and receiving money were not illegal de jure, we are able to directly ask survey respondents about being a subsidy recipient as well as about their party preferences.

We then ask if citizens interpret receiving material subsidies and then supporting the incumbent based on these subsidies as socially undesirable, stigmatized behavior even when these transfers were not de jure illegal. On the one hand, distributive rules of the policies were clear and transparent, while influencing votes (rather than coercing certain behavior) are not necessarily inappropriate. Additionally, even if a voter has been lavished with cash by the government, this individual can ignore this transfer and vote on other grounds without personal material consequence. On the other hand, supporting a party based on material rewards, more precisely on cash, may be seen as socially unacceptable, especially when these transfers rather favored the better off voters.

Using a double-list experiment to mitigate concerns about social desirability bias, we find that the 2022 subsidies worked mainly by demobilizing voters who might have opposed the incumbent party. In particular, family tax refund recipients with primary education or living in rural areas, and the pension recipients living in the capital city, were less likely to vote for the opposition coalition than non-recipient voters with similar socio-demographic characteristics. Although we cannot determine conclusively whether these two subsidy programs explain Fidesz’s victory in 2022, we estimate that they affected about 20% of voters.

Authors

• Thomas Pepinsky, Cornell University

• Adam Reiff, Hungarian Research Network, Centre of Economic and Regional Studies

• Krisztina Szabó