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Are governments paying a price for austerity? Fiscal consolidations reduce government approval

Published online by Cambridge University Press:  23 February 2021

Olivier Jacques*
Affiliation:
Department of Political Studies, Queen’s University, MacKintosh-Corry Hall, Room C321, Kingston, ON, Canada, KL7 3N6
Lukas Haffert
Affiliation:
Department of Political Science, University of Zurich, Affolternstrasse 56, 8050, Zurich, Switzerland
*

Abstract

What are the political effects of fiscal consolidations? Theoretical considerations suggest that consolidations should reduce the public’s support for their governments, but empirical studies have found surprisingly small effects on government support. However, most of these studies analyze electoral outcomes, which are separated from the consolidation by a multi-link causal chain. We argue that more direct measures of government support, such as executive approval, show much stronger negative effects of consolidation, since they are less affected by the strategic timing of consolidations or the political alternatives on offer. We analyze a time series cross-sectional dataset of executive approval in 14 Organization for Economic Co-operation and Development (OECD) countries from 1978 to 2014, using the narrative approach to measure fiscal consolidations. We find that spending cuts decrease government approval, especially during economic downturns, but tax increases’ impact on approval remains minimal. Finally, left- and right-wing governments are equally likely to lose approval after implementing austerity.

Type
Research Article
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of European Consortium for Political Research

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