Voter Responses to Fiscal Austerity

Abstract

Governments have great difficulties to design politically sustainable responses to rising public debt. These difficulties are grounded in a limited understanding of the popular constraints during times of fiscal pressure. For instance, an influential view claims that fiscal austerity does not entail significant political risk. But this research potentially underestimates the impact of austerity on voters because of strategic selection bias. To address this challenge, we conduct survey experiments in Spain, Portugal, Italy, the UK and Germany. Contrary to the previous literature, the results show that the reelection chances of governments decrease massively when they propose austerity measures. Voters object particularly strongly to spending cuts and, to a lesser extent, to tax increases. While voters also disapprove of fiscal deficits, they weight the costs of austerity policies more than their potential benefits for the fiscal balance. These findings are inconsistent with the policy recommendations of international financial institutions.