Measuring the Effects of Economic Austerity on Pro-Sociality: Evidence from Greece

Abstract

The European debt crisis gave rise to policies of fiscal austerity designed to instill discipline and return economies to growth after a short-lived period of structural adjustment. Greece received several bailouts conditional on implementing severe spending cuts and structural reforms. These policies — many of them poorly implemented — led to a prolonged period of recession. While the economic effects of austerity policies and the political causes of the crisis have been studied extensively, less is known about their social impact. We explore the effects of the crisis on pro-sociality using new household-level data and experimental evidence from Greece. We focus on the effects of joblessness, the most severe outcome of the economic downturn. We find a strong relationship between job loss and decreased generalized solidarity. We find evidence of in-group bias and the bias becomes more pronounced due to exposure to austerity policies. However, this bias is not mediated by beliefs that foreigners are to blame for the economic crisis.

Keywords: Austerity, Economic Crises, Greece, Experiment, Survey, Pro-Sociality

JEL Classification: H12, I31, Z18