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Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2008

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  • Ponticelli, Jacopo
  • Voth, Hans-Joachim

Abstract

Does fiscal consolidation lead to social unrest? Using cross-country evidence for the period 1919 to 2008, we examine the extent to which societies become unstable after budget cuts. The results show a clear correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the case. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest after austerity measures. Growing media penetration does not strengthen the effect of cut-backs on the level of unrest.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8513.

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Date of creation: Aug 2011
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Handle: RePEc:cpr:ceprdp:8513

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Keywords: demonstrations; Europe; government deficits; instability; public expediture; riots; unrest;

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  1. Andrea Pescatori & Daniel Leigh & Jaime Guajardo & Pete Devries, 2011. "A New Action-Based Dataset of Fiscal Consolidation," IMF Working Papers 11/128, International Monetary Fund.
  2. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-34, June.
  3. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
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  7. Daniel Leigh & Andrea Pescatori & Jaime Guajardo, 2011. "Expansionary Austerity New International Evidence," IMF Working Papers 11/158, International Monetary Fund.
  8. Christina D. Romer and David H. Romer., 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," Economics Working Papers 89-107, University of California at Berkeley.
  9. Anjali Thomas Bohlken & Ernest John Sergenti, 2010. "Economic growth and ethnic violence: An empirical investigation of Hindu—Muslim riots in India," Journal of Peace Research, Peace Research Institute Oslo, vol. 47(5), pages 589-600, September.
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  13. Joachim Voth, 2011. "Tightening Tensions: Fiscal Policy and Civil Unrest in Eleven South American Countries, 1937 - 1995," Working Papers Central Bank of Chile 612, Central Bank of Chile.
  14. Valerie A. Ramey, 2011. "Identifying Government Spending Shocks: It's all in the Timing," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 1-50.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009
    by bbatiz in NEP-HIS blog on 2011-08-21 11:42:59
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Cited by:
  1. Andini, Corrado & Cabral, Ricardo, 2012. "Further Austerity and Wage Cuts Will Worsen the Euro Crisis," IZA Policy Papers 37, Institute for the Study of Labor (IZA).
  2. Waśniewski, Krzysztof, 2012. "Local governments’ fiscal policy as a factor of urban development – evidence from Poland," MPRA Paper 39176, University Library of Munich, Germany.
  3. Francesco Passarelli & Guido Tabellini, 2013. "Emotions and Political Unrest," CESifo Working Paper Series 4165, CESifo Group Munich.
  4. Kevin H. O'Rourke & Alan M. Taylor, 2013. "Cross of Euros," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 167-92, Summer.

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