Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2008
University of Chicago - Booth School of Business
University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)
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.
Number of Pages in PDF File: 41
Keywords: demonstrations, Europe, government deficits, instability, public expenditure, riots, unrest
JEL Classification: H40, H50, H60, N14
Date posted: August 1, 2011 ; Last revised: December 6, 2011