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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. We find a positive correlation between fiscal retrenchment and instability. Expenditure cuts are particularly potent in fueling protests; tax rises have only small effects. To isolate the effect of policy decisions on social unrest we exploit variation in neighboring countries’ past fiscal policies.

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  • Ponticelli, Jacopo & Voth, Hans-Joachim, 2020. "Austerity and anarchy: Budget cuts and social unrest in Europe, 1919–2008," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 1-19.
    • Handle: RePEc:eee:jcecon:v:48:y:2020:i:1:p:1-19
    DOI: 10.1016/j.jce.2019.09.007
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    More about this item

    JEL classification:

    • 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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