Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009

30 Pages Posted: 12 Aug 2011

See all articles by Jacopo Ponticelli

Jacopo Ponticelli

Northwestern University - Kellogg School of Management

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: August 2011

Abstract

Does fiscal consolidation lead to social unrest? From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor. We also analyse interactions with various economic and political variables. 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 as a result of austerity measures. Growing media penetration does not lead to a stronger effect of cut-backs on the level of unrest.

Keywords: demonstrations, Europe, government deficits, instability, public expediture, 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, 1919-2009 (August 2011). CEPR Discussion Paper No. DP8513. Available at SSRN: https://ssrn.com/abstract=1908561

Jacopo Ponticelli (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Dr
Evanston, IL 60208
United States

HOME PAGE: http://https://www.kellogg.northwestern.edu/faculty/ponticelli/index.html

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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