Working Paper: NBER ID: w17655
Authors: Alberto F. Alesina; Dorian Carloni; Giampaolo Lecce
Abstract: 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.
Keywords: Fiscal Adjustments; Electoral Consequences; OECD Countries
JEL Codes: H2; H3; H5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large fiscal adjustments (E62) | electoral defeats (K16) |
| strong and popular governments (H10) | fiscal adjustments (E62) |
| fiscally loose governments (E62) | electoral losses (K16) |
| deficit reduction policies (H62) | electoral losses (K16) |
| spending-based adjustments (H61) | government changes (H11) |
| tax-based adjustments (H20) | government changes (H11) |