Economic globalization without effective compensation of its losers has contributed to Brexit, the election of Trump and the surge of radical-right parties. Despite calls for adequate compensation of those affected by economic shocks, the electoral payoff of this compensatory strategy is unclear. Amid the current globalization backlash, we study the impact of a novel compensatory mechanism set up by the European Union: the European Globalization Adjustment Fund (EGF). By going beyond the American context, we offer a systematic evaluation of whether compensating the losers of globalization pays off electorally through the first assessment of the EGF’s impact on voting behavior.

We theorize that, if EGF is consequential, incumbents should be punished less, populists should receive less support and turnout should be higher in regions that applied to the Fund compared to regions that were eligible but did not apply. To evaluate these hypotheses, we build an original panel dataset for 20 European Union countries connecting more than 25,000 localized labor market shocks in the European Union since 2002 with subnational results in legislative and European elections and details about EGF applications. In European elections, we find that a successful EGF application decreased turnout and boosted incumbents when the Fund request was made in the pre-election year. We also find that in regions that successfully applied for compensation, populist parties tended to lose support in the next European elections. However, EGF funding has a limited impact in legislative elections, a conclusion confirmed with individual-level analyses based on the European Social Survey.