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Austerity and Elections

Author

Listed:
  • Alesina, Alberto
  • Ciminelli, Gabriele
  • Furceri, Davide
  • Saponaro, Giorgio

Abstract

This paper revisits the conventional but unproven wisdom that voters penalize governments for adopting fiscal austerity in a sample of advanced economies. We consider the composition of the austerity package and the economic manifesto of the implementing government and find that austerity packages consisting mostly of tax hikes have a significant electoral cost, which is larger for government parties that campaigned on a free-market manifesto. Conversely, expenditure-based austerity is costlier for government parties that did not run on a small-government platform, but may be beneficial for those that did. We show in a model that these results are an equilibrium outcome of the strategic interaction between polarized voters’ mobilizers and centrist politicians. These politicians may be either unwilling or temporarily forced not to fulfil their campaign promises. Mobilizers lack information about the politicians’ types and punish them whenever they observe a deviation to the centre.

Suggested Citation

  • Alesina, Alberto & Ciminelli, Gabriele & Furceri, Davide & Saponaro, Giorgio, 2024. "Austerity and Elections," CEPR Discussion Papers 18859, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18859
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    • Alberto Alesina & Gabriele Ciminelli & Davide Furceri & Giorgio Saponaro, 2024. "Austerity and elections," Economica, London School of Economics and Political Science, vol. 91(363), pages 1075-1099, July.

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    2. Gabriel, Ricardo Duque & Klein, Mathias & Pessoa, Sofia, 2022. "The Political Costs of Austerity," Working Paper Series 418, Sveriges Riksbank (Central Bank of Sweden).
    3. Vybhavi Balasundharam & Olivier Basdevant & Dalmacio Benicio & Andrew Ceber & Yujin Kim & Luca Mazzone & Hoda Selim & Yongzheng Yang, 2023. "Fiscal Consolidation: Taking Stock of Success Factors, Impact, and Design," IMF Working Papers 2023/063, International Monetary Fund.
    4. Baghdadi, Leila & Labidi, Moez, 2023. "Public Debt, Growth, And Stabilization In Tunisia: A New Narrative for a Structural Reform Agenda," FDL Policy Notes 2310, CEPREMAP.
    5. Brueckner, Markus & Ciminelli, Gabriele & Loayza, Norman, 2025. "Oil revenues and labor market reforms," World Development, Elsevier, vol. 193(C).
    6. Santiago Lago‐Peñas & María Cadaval‐Sampedro & Ana Herrero‐Alcalde, 2024. "Fiscal consolidation and voting: on the electoral costs of budgetary stability," Fiscal Studies, John Wiley & Sons, vol. 45(4), pages 559-581, December.
    7. Alpino, Matteo & Asatryan, Zareh & Blesse, Sebastian & Wehrhöfer, Nils, 2022. "Austerity and distributional policy," Journal of Monetary Economics, Elsevier, vol. 131(C), pages 112-127.

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