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

39 Pages Posted: 1 Aug 2011 Last revised: 14 Jan 2019

See all articles by Jacopo Ponticelli

Jacopo Ponticelli

Northwestern University - Kellogg School of Management; NBER

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: December 4, 2018

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.

Keywords: demonstrations, Europe, government deficits, instability, public expenditure, riots, unrest

JEL Classification: H40, H50, H60, N14

Suggested Citation

Ponticelli, Jacopo and Voth, Hans-Joachim, Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2008 (December 4, 2018). Available at SSRN: https://ssrn.com/abstract=1899287 or http://dx.doi.org/10.2139/ssrn.1899287

Jacopo Ponticelli

Northwestern University - Kellogg School of Management ( email )

2211 Campus Dr
Evanston, IL 60208
United States

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/ponticelli/index.html

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hans-Joachim Voth (Contact Author)

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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