Populists and fiscal policy: The case of Poland

Abstract

The past decade has witnessed an increase in populist movements across the world. Some of those movements have gained strong political support and formed populist governments promising new sets of economic and fiscal policies. This raises the pertinent policy question: how do such populist governments influence fiscal policy outcomes? We approach this question by looking at the case of Poland which according to several recent studies has experienced the highest level of populist rhetoric in recent years. We performed two types of analyses. First, standard time series estimations of fiscal sustainability parameters that are typical for literature on fiscal sustainability, for both full sample and rolling-windows. Second, a counter-factual analysis using the synthetic control method (SCM) which is a useful complementary framework for our analysis of populists’ economic performance. Overall, our estimates suggest that in the period of 2016–2019 fiscal sustainability parameters were the lowest since Poland joined the EU in 2004. The SCM analysis, in turn, showed that populist PiS fiscal policies might have been viable compared to the counter-factual data. At the same time, we also noted sensitivity of SCM across several dimensions and conclude that such sensitivity analysis might be useful or even necessary in future studies on populism.