Working Paper: CEPR ID: DP8513
Authors: Jacopo Ponticelli; Hans-Joachim Voth
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. The results show a clear correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the case. While autocracies and democracies show a 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.
Keywords: demonstrations; europe; government deficits; instability; public expenditure; riots; unrest
JEL Codes: H40; H50; H60; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| budget cuts (H72) | increased social unrest (P39) |
| economic downturns (F44) | increased social unrest (P39) |
| ethnic fragmentation (J15) | increased social unrest (P39) |
| unemployment (J64) | increased social unrest (P39) |
| budget cuts (H72) | unrest incidents (D74) |
| lower institutional quality (O17) | increased social unrest (P39) |
| high unrest periods (E32) | increased social unrest (P39) |