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

41 Pages Posted: 1 Aug 2011 Last revised: 6 Dec 2011

Jacopo Ponticelli

Kellogg School of Management - Department of Finance

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 2011

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 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 2011). Available at SSRN: https://ssrn.com/abstract=1899287 or http://dx.doi.org/10.2139/ssrn.1899287

Jacopo Ponticelli

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
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)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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