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The Electoral Consequences of Large Fiscal Adjustments

  • Alberto F. Alesina
  • Dorian Carloni
  • Giampaolo Lecce

The conventional wisdom regarding the political consequences of large reductions of budget deficits is that they are very costly for the governments which implement them: they are punished by voters at the following elections. In the present paper, instead, we find no evidence that governments which quickly reduce budget deficits are systematically voted out of office in a sample of 19 OECD countries from 1975 to 2008. We also take into consideration issues of reverse causality, namely the possibility that only "strong and popular" governments can implement fiscal adjustments and thus they are not voted out of office "despite" having reduced the deficits. In the end we conclude that many governments can reduce deficits avoiding an electoral defeat.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17655.

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Date of creation: Dec 2011
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Publication status: published as The Electoral Consequences of Large Fiscal Adjustments , Alberto Alesina, Dorian Carloni, Giampaolo Lecce. in Fiscal Policy after the Financial Crisis , Alesina and Giavazzi. 2013
Handle: RePEc:nbr:nberwo:17655
Note: PE POL
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  1. Hauptmeier, Sebastian & Heipertz, Martin & Schuknecht, Ludger, 2006. "Expenditure reform in industrialised countries: a case study approach," Working Paper Series 0634, European Central Bank.
  2. Adi Brender & Allan Drazen, 2004. "Political Budget Cycles in New versus Established Democracies," NBER Working Papers 10539, National Bureau of Economic Research, Inc.
  3. Marco Buti & Paul Noord, 2004. "Fiscal Discretion and Elections in the Early Years of EMU," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 737-756, November.
  4. Roberto Perotti, 2012. "The "Austerity Myth": Gain without Pain?," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 307-354 National Bureau of Economic Research, Inc.
  5. Marco Buti & Alessandro Turrini & Paul Noord & Pietro Biroli, 2009. "Defying the ‘Juncker curse’: can reformist governments be re-elected?," Empirica, Springer, vol. 36(1), pages 65-100, February.
  6. Honkapohja, Seppo & Koskela, Erkki, 2002. "The Economic Crisis of the 1990s in Finland," Discussion Papers 683, The Research Institute of the Finnish Economy.
  7. Roberto Perotti, 2011. "The "Austerity Myth": Gain without Pain?," Working Papers 430, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. Marco Buti & Alessandro Turrini & Paul Van den Noord & Pietro Biroli, 2010. "Reforms and re-elections in OECD countries," Economic Policy, CEPR;CES;MSH, vol. 25, pages 61-116, 01.
  9. Alexander Plekhanov & Manmohan S. Kumar & Daniel Leigh, 2007. "Fiscal Adjustments; Determinants and Macroeconomic Consequences," IMF Working Papers 07/178, International Monetary Fund.
  10. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
  11. Roberto Perotti, 2011. "The "Austerity myth": Gain Without Pain?," BIS Working Papers 362, Bank for International Settlements.
  12. Marco Buti & Paul van den Noord, 2004. "Fiscal policy in EMU: Rules, discretion and political incentives," European Economy - Economic Papers 206, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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