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The Electoral Consequences of Large Fiscal Adjustments

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  • Alberto F. Alesina
  • Dorian Carloni
  • Giampaolo Lecce

Abstract

The conventional wisdom regarding the political consequences of large reductions of budget deficits is that they are very costly for the governments which implement them: they are punished by voters at the following elections. In the present paper, instead, we find no evidence that governments which quickly reduce budget deficits are systematically voted out of office in a sample of 19 OECD countries from 1975 to 2008. We also take into consideration issues of reverse causality, namely the possibility that only "strong and popular" governments can implement fiscal adjustments and thus they are not voted out of office "despite" having reduced the deficits. In the end we conclude that many governments can reduce deficits avoiding an electoral defeat.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17655.

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Date of creation: Dec 2011
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Publication status: published as The Electoral Consequences of Large Fiscal Adjustments , Alberto Alesina, Dorian Carloni, Giampaolo Lecce. in Fiscal Policy after the Financial Crisis , Alesina and Giavazzi. 2013
Handle: RePEc:nbr:nberwo:17655

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  1. Marco Buti & Alessandro Turrini & Paul Noord & Pietro Biroli, 2009. "Defying the ‘Juncker curse’: can reformist governments be re-elected?," Empirica, Springer, vol. 36(1), pages 65-100, February.
  2. Hauptmeier, Sebastian & Heipertz, Martin & Schuknecht, Ludger, 2006. "Expenditure reform in industrialised countries: a case study approach," Working Paper Series 0634, European Central Bank.
  3. Roberto Perotti, 2012. "The "Austerity Myth": Gain without Pain?," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 307-354 National Bureau of Economic Research, Inc.
  4. Marco Buti & Paul van den Noord, 2004. "Fiscal policy in EMU: Rules, discretion and political incentives," European Economy - Economic Papers 206, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  5. Marco Buti & Paul Noord, 2004. "Fiscal Discretion and Elections in the Early Years of EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 737-756, November.
  6. Roberto Perotti, 2011. "The "Austerity Myth": Gain without Pain?," Working Papers 430, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  7. Roberto Perotti, 2011. "The "Austerity myth": Gain Without Pain?," BIS Working Papers 362, Bank for International Settlements.
  8. Honkapohja, Seppo & Koskela, Erkki, 2002. "The Economic Crisis of the 1990s in Finland," Discussion Papers 683, The Research Institute of the Finnish Economy.
  9. Alexander Plekhanov & Manmohan S. Kumar & Daniel Leigh, 2007. "Fiscal Adjustments," IMF Working Papers 07/178, International Monetary Fund.
  10. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
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  12. Marco Buti & Alessandro Turrini & Paul Van den Noord & Pietro Biroli, 2010. "Reforms and re-elections in OECD countries," Economic Policy, CEPR & CES & MSH, vol. 25, pages 61-116, 01.
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Cited by:
  1. Atif Mian & Amir Sufi & Francesco Trebbi, 2014. "Resolving Debt Overhang: Political Constraints in the Aftermath of Financial Crises," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 1-28, April.
  2. Rosa C. Hayes & Masami Imai & Cameron A. Shelton, 2013. "Attribution Error in Economic Voting: Evidence from Trade Shocks," Wesleyan Economics Working Papers 2013-009, Wesleyan University, Department of Economics.
  3. Linda Gonçalves Veiga, 2013. "Voting functions in the EU-15," Public Choice, Springer, vol. 157(3), pages 411-428, December.
  4. Susan Lund & Charles Roxburgh, 2010. "Debt and Deleveraging," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 11(2), pages 1-30, April.
  5. Jaroslaw Kantorowicz, 2014. "Judges as Fiscal Activists: Can Constitutional Review Shape Public Finance?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 79-104, June.

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