Social democratic austerity: the conditional role of agenda dynamics and issue ownership

Abstract

ABSTRACTOver the past 30 years, left-wing parties have increasingly abandoned the interests of their core constituency to embark on a right-wing journey of fiscal austerity. I argue that the changing partisan pattern in fiscal policy can in part be explained by analysing social democrats’ need to signal fiscal competence. Drawing on issue ownership theory, my starting point is that voters perceive the Right as better able to balance the budgets than the Left. This leads left-wing incumbents to compensate for their bad fiscal reputation when concerns about balanced budgets are salient in the political system. They do so by reducing spending and budget deficits as much or even more than right-wing governments. In this way, an asymmetric fiscal reputation makes partisan differences in fiscal policy disappear. Support for my claims is found estimating a set of error correction models with data from 21 Organization for Economic Co-operation and Development countries between 1980 and 2006.