Does Austerity Cause Polarization?
38 Pages Posted: 16 Mar 2020 Last revised: 7 Jul 2021
Date Written: June 3, 2021
In recent decades, governments in many Western democracies have shown a remarkable consensus in pursuing austerity during periods of strained public finances. In this paper, we show that these decisions have consequences for political polarization. Our macro-level analysis of 166 elections since 1980 finds that fiscal restraint increases both electoral abstention and votes for non-mainstream parties, thereby boosting party system polarization. A detailed analysis of selected fiscal adjustments also shows that new, small and radical parties benefit most from austerity policies. Finally, survey experiments with a total of 8,800 respondents in Germany, Portugal, Spain and the United Kingdom indicate that the effects of austerity on polarization are particularly pronounced when the mainstream right and left parties both stand for fiscal restraint. Austerity is a substantial cause of political polarization and hence political instability in industrialized democracies.
Keywords: Fiscal policy; austerity; voting; public opinion; polarization; populism
JEL Classification: E62, H12, H4, H5, H50, H61, H62, H63, P16, P43
Suggested Citation: Suggested Citation