Voter Responses to Fiscal Austerity

Abstract

Governments have great di culties to design politically sustainable responses to rising public debt. These di culties are grounded in a limited understanding of the popular constraints during times of fiscal pressure. For instance, an influential view claims that fiscal austerity does not entail significant political risk. But this research potentially underestimates the impact of austerity on votes because of strategic selection bias. To address this challenge, we conduct survey experiments in Spain, Portugal, Italy, the UK and Germany. Contrary to the previous literature, the results show that the reelection chances of governments decrease massively when they propose austerity measures. Voters object particularly strongly to spending cuts and, to a lesser extent, to tax increases. While voters also disapprove of fiscal deficits, they weight the costs of austerity policies more than their potential benefits for the fiscal balance. These findings are inconsistent with the policy recommendations of international financial institutions.

Did Austerity Cause Brexit?

“…The spare bedroom indicator is constructed using the information on the household composition and the age distribution of children allowing a near replication of the government's criteria. 29 Department for Work & Pensions, "Under-Occupation of Social Housing: Impact Assessment," June 28, 2012, https://goo.gl/xFWDqW. these three treatments, which is similar compared to the aggregate estimate from Beatty and Fothergill (2013), suggesting that between 2 million to 3 million households (around 10 percent of households) were affected by these three measures.…”

“…By contrast, this paper comprehensively adds a time dimension. 4 Colantone and Stanig (2018), following the seminal paper by Autor, Dorn, and Hanson (2013), finds compelling evidence suggesting that Leave support was distinctly higher in areas of the United Kingdom most exposed to import competition from low-income countries. This paper qualifies these findings, suggesting that post-2010 austerity, by cutting transfer payments to globalization's likely losers, is an important factor that can explain the timing of the UK's populist revolt.…”

Fiscal consolidations and electoral outcomes in emerging economies: Does the policy mix matter? Macro and micro level evidence from Latin America

“…The literature on the economic (Alesina, Favaro and Giavazzi, 2019;Guajardo, Leigh and Pescatori, 2014) and political effects (Hübscher, Sattler, and Wagner, 2018; Pasarelli and Tabellini 2017; Alesina, Carloni, and Lecce 2013) of fiscal consolidations is mostly based on the experience of OECD countries. There are two contending views regarding the electoral consequences of fiscal adjustments in advanced democracies.…”

“…According to an influential view, fiscal austerity is not punished by voters at the polls (Alesina, Carloni and Lecce, 2013;Alesina, Perotti and Tavares, 1998), possibly indicating that voters are fiscal conservatives (Peltzman, 1992). Others contend that the lack of correlation between fiscal austerity and political outcomes is due to a selection effect whereby governments implement austerity only when they can get away with it (Arias and Stasavage, 2018;Hübscher, Sattler and Wagner, 2018). Electoral concerns are thus key to understand the incentives of policymakers to pursue fiscal adjustment in the first place (Hübscher and Sattler, 2017).…”

“…On the other, the composition may fare differently with voters independently of its general economic consequences, by affecting broad or particular interests. In work that uses a survey experiment in five European countries, Hübscher, Sattler, and Wagner (2018) find that voters especially oppose spending cuts on broad public services, and to a lesser extent, object to tax increases.…”