Affiliation:
1. Harvard University and IGIER Bocconi
2. Asian Development Bank
3. Furceri: International Monetary Fund CEPR and University of Palermo
4. Harvard University
Abstract
AbstractThis paper revisits the conventional but unproven wisdom that voters penalize governments for adopting fiscal austerity in a sample of advanced economies. We consider the composition of the austerity package and the economic manifesto of the implementing government, and find that austerity packages consisting mostly of tax hikes have a significant electoral cost, which is larger for government parties that campaigned on a free‐market manifesto. Conversely, expenditure‐based austerity is costlier for government parties that did not run on a small‐government platform, but may be beneficial for those that did.
Cited by
2 articles.
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