Austerity and anarchy: Budget cuts and social unrest in Europe, 1919-2008
AbstractDoes 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. Expenditure cuts are particularly potent in fueling protests; tax rises have only small and insignificant effects. We test if the relationship simply reflects economic downturns, using a recently-developed IMF dataset on exogenous expenditure shocks, and conclude that this is not the case. While autocracies and democracies show 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. We also find that austerity episodes that result in unrest lead to quick reversals of fiscal policy.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1342.
Date of creation: Jul 2011
Date of revision: Oct 2012
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Other versions of this item:
- Ponticelli, Jacopo & Voth, Hans-Joachim, 2011. "Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2008," CEPR Discussion Papers 8513, C.E.P.R. Discussion Papers.
- Jacopo Ponticelli & Hans-Joachim Voth, 2012. "Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2008," Working Papers 676, Barcelona Graduate School of Economics.
- H40 - Public Economics - - Publicly Provided Goods - - - General
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- 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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