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


  • Jacopo Ponticelli
  • Hans-Joachim Voth


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. 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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  • 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.
  • Handle: RePEc:bge:wpaper:676

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    References listed on IDEAS

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    Cited by:

    1. Adrian Chadi & Matthias Krapf, 2017. "The Protestant Fiscal Ethic: Religious Confession And Euro Skepticism In Germany," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1813-1832, October.
    2. Marco Manacorda & Andrea Tesei, 2016. "Liberation Technology: Mobile Phones and Political Mobilization in Africa," HiCN Working Papers 217, Households in Conflict Network.
    3. Guimarães, Bernardo de Vasconcellos & Ladeira, Carlos Eduardo de Almeida, 2015. "The determinants of IMF fiscal conditionalities: economics or politics?," Textos para discussão 391, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    4. Alan de Bromhead & Barry Eichengreen & Kevin H. O'Rourke, 2012. "Right-Wing Political Extremism in the Great Depression," NBER Working Papers 17871, National Bureau of Economic Research, Inc.
    5. Afflatet, Nicolas, 2015. "Public Debt and Borrowing. Are Governments Disciplined by Financial Markets?," Working Paper 156/2015, Helmut Schmidt University, Hamburg.
    6. repec:eee:macchp:v2-2599 is not listed on IDEAS
    7. Pietro Dallari & Antonio Ribba, 2015. "Economic Shocks and their Effects on Unemployment in the Euro Area Periphery under the EMU," Center for Economic Research (RECent) 114, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    8. Francesco Passarelli & Guido Tabellini, 2017. "Emotions and Political Unrest," Journal of Political Economy, University of Chicago Press, vol. 125(3), pages 903-946.
    9. 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).
    10. Röhrs, Sigrid & Winter, Christoph, 2017. "Reducing government debt in the presence of inequality," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 1-20.
    11. Gaia Narciso & Battista Severgnini, 2016. "The Deep Roots of Rebellion: Evidence from the Irish Revolution," Trinity Economics Papers tep2216, Trinity College Dublin, Department of Economics.
    12. Kevin H. O'Rourke & Alan M. Taylor, 2013. "Cross of Euros," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 167-192, Summer.
    13. Christoph A. Schaltegger & Martin Weder, 2013. "Will Europe Face A Lost Decade? A Comparison With Japan's Economic Crisis," CREMA Working Paper Series 2013-03, Center for Research in Economics, Management and the Arts (CREMA).
    14. Cornelius Christian & James Fenske, 2015. "Economic shocks and unrest in French West Africa," CSAE Working Paper Series 2015-01, Centre for the Study of African Economies, University of Oxford.
    15. Funke, Manuel & Schularick, Moritz & Trebesch, Christoph, 2016. "Going to extremes: Politics after financial crises, 1870–2014," European Economic Review, Elsevier, vol. 88(C), pages 227-260.
    16. Gunther Tichy, 2012. "The Sovereign Debt Crisis: Causes and Consequences," Austrian Economic Quarterly, WIFO, vol. 17(2), pages 95-107, May.
    17. Alberto Alesina & Andrea Passalacqua, 2015. "The Political Economy of Government Debt," NBER Working Papers 21821, National Bureau of Economic Research, Inc.
    18. Pietro Dallari & Antonio Ribba, 2015. "Economic Shocks and their Effects on Unemployment in the Euro Area Periphery under the EMU," Department of Economics (DEMB) 0057, University of Modena and Reggio Emilia, Department of Economics "Marco Biagi".
    19. Waśniewski, Krzysztof, 2012. "Local governments’ fiscal policy as a factor of urban development – evidence from Poland," MPRA Paper 39176, University Library of Munich, Germany.
    20. Caprettini, Bruno & Voth, Hans-Joachim, 2017. "Rage Against the Machines: Labour-Saving Technology and Unrest in England, 1830-32," CEPR Discussion Papers 11800, C.E.P.R. Discussion Papers.
    21. Stracca, Livio & Kalbhenn, Anna, 2015. "Does fiscal austerity affect public opinion?," Working Paper Series 1774, European Central Bank.

    More about this item


    demonstrations; Europe; government deficits; instability; public expenditure; riots; unrest;

    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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