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Fatal Austerity

Author

Listed:
  • Stephanie Ettmeier
  • Alexander Kriwoluzky
  • Moritz Schularick
  • Lucas ter Steege

Abstract

This paper quantifies the macroeconomic consequences of the fiscal austerity program that preceded the Nazi power grab in Germany in 1933. Between 1930 and 1932, German Chancellor Heinrich Bruning enacted large expenditure cuts and tax increases against the backdrop of a depressed economy, global trade disintegration, and the rise of political extremism. We use a novel granular fiscal dataset to identify the macroeconomic effects of Bruning's austerity policies. We find that the austerity shocks reduced German GDP by more than four percent and caused an increase in unemployment by almost two million, paving the way for extremist parties' success.

Suggested Citation

  • Stephanie Ettmeier & Alexander Kriwoluzky & Moritz Schularick & Lucas ter Steege, 2025. "Fatal Austerity," CERGE-EI Working Papers wp801, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp801
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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