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Does Austerity Cause Polarization?

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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.
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Does Austerity Cause Polarization?
Evelyne H¨ubscher
Central European University
Thomas Sattler
University of Geneva
Markus Wagner
University of Vienna
June 3, 2021
Abstract
In recent decades, governments in many Western democracies have shown a re-
markable 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.
Previous versions of this paper were presented at the EUI Political Science Research
Seminar, December 4, 2019; the Annual Meeting of the International Political Economy
Society (IPES), UC San Diego, November 15-16, 2019; the ‘Economic Consequences of the
Peace Centenary Conference’, University of Cambridge, September 9-10, 2019; the ECPR
General Conference, Wroclaw, September 3-6, 2019; the Annual Meeting of the American
Political Science Association (APSA), Washington D.C., August 29 - September 1, 2019; and
the Annual Meeting of the European Political Science Association (EPSA), Belfast, June 20-
22, 2019. We thank Larry Bartels, Yotam Margalit, Sarah Wilson Sokhey, participants at a
seminar presentation at the EUI and the participants at these conferences for comments. We
also thank Jascha Gr¨ubel, Akos Mate, Pedro Perfeito da Silva and Colin Walder for excellent
research assistance. The authors acknowledge financial support from the Swiss Network for
International Studies (SNIS). Thomas Sattler also acknowledges financial support from the
Swiss National Science Foundation, grant no. 165480.
1
1 Introduction
Fiscal policy in Western democracies was until recently characterized by a remarkable con-
sensus among governing parties. Especially in times of crisis, but also more generally, gov-
ernments of the centre-left and centre-right agreed that low fiscal deficits and hence fiscal
restraint was the appropriate policy to promote economic stability and growth (Blyth, 2013).
As a result, both left and right political parties in many countries have increasingly embarked
on a path of fiscal austerity when in government (Mudge, 2018; Hopkin, 2020). The reasons
for this trend are manifold, but key explanations look to the constraints imposed by inter-
national integration (Konstantinidis, Matakos and Hutlu-Eren, 2019), a growing appeal of
technocratic solutions (Alexiadou, Spaniel and Gunaydin, 2021) or the emergence of a new
economic policy consensus (Blyth, 2013; Mudge, 2018).
In this paper, we show that this fiscal policy consensus among mainstream politicians
has led to increasing party system polarization. Such polarization has been witnessed across
Europe, where party competition has radicalized due to the decline of centrist, mainstream
competitors and the concomitant rise of previously small, non-mainstream parties on the
edges of the political spectrum (De Vries and Hobolt, 2020). In Italy, where many of these
developments have been preempted, most traditional parties have almost vanished, having
been replaced by new anti-establishment parties. Similar developments can be seen in other
countries, with the rise of Podemos and Vox in Spain, PVV and FVD in the Netherlands, the
Sweden Democrats in Sweden, the Left Bloc and Chega in Portugal or the Rassemblement
National in France. Even ostensibly more stable countries such as Germany have witnessed
change, with the joint vote share of the Christian Democrats and the Social Democrats
falling from 76% in 1998 to below 50% in 2021.
Explanations of polarization and party system change generally focus on structural fac-
tors, such as economic globalization (e.g., Jensen, Quinn and Weymouth, 2017; Colantone
2
and Stanig, 2018; Autor et al., 2020), changes to class politics (Halikiopoulou and Vlan-
das, 2016; Gidron and Hall, 2017; Oesch and Rennwald, 2018; Gingrich, 2019), the growing
salience of issues relating to identities, culture and immigration (Kriesi et al., 2008; Norris
and Inglehart, 2018), or economic crises (Hern´andez and Kriesi, 2016; Casal B´ertoa and
Weber, 2019; Hobolt and Tilley, 2016).1This literature, however, has largely ignored the
role that governments and their economic decisions play in such periods of economic insecu-
rity. When economic shocks hit voters, governments can try to mediate the effects of these
changes in different ways. For instance, fiscal policy as the government’s main economic
policy instrument is decisive in helping low-skilled workers and the losers of globalization
cope with the consequences of structural change (Rodrik, 1998; Hays, 2009; Vlandas and
Halikiopoulou, 2021). The fiscal policies that political parties propose in this context, thus,
are important to understand the political behavior of voters. Elites therefore play an impor-
tant role in explaining party system stability (Tavits, 2008).
If structural change creates demand for an active fiscal policy, at least among a subgroup
of the electorate, fiscal austerity and restraint disappoints and alienates voters (Hopkin,
2020). Specifically, fiscal restraint created a pool of dissatisfied voters who lacked a credible
anti-austerity alternative among mainstream parties. Where governments opted for fiscal
cutbacks, voters therefore defected from mainstream parties that occupy similar policy po-
sitions in key policymaking areas (Spoon and Kl¨uver, 2019). When defecting, some of these
voters abstained from voting at all, while others decided to support non-mainstream, often
more radical political parties that rejected austerity. In the aggregate, both decisions led to
an increase in party system polarization.
Such an increase in party polarization poses a challenge for policymaking in democracies
1Economic processes and identity politics can also interact (see, e.g., Baccini and Wey-
mouth, 2021).
3
(Lee, 2015). A more polarized political landscape makes it more difficult for parties to build
stable government coalitions and agree on sustainable policy solutions, both of which are
needed to govern in times of economic insecurity (Frye, 2010; Bingham Powell Jr., 1986).
This leads to considerable policy uncertainty (Konstantinidis, Matakos and Hutlu-Eren,
2019; Funke, Schularick and Trebesch, 2016). Struggles to build stable coalitions and the
associated broken policy-making processes can be witnessed in many European countries,
such as Israel, Sweden, Italy or in particular Spain, which has held four general elections
within the last four years. This suggests that solutions to these challenges need to take into
account political competition over key economic policies.
We examine the impact of fiscal austerity on political outcomes in two steps. The first
part of the analysis uses observational data from 166 elections in 16 OECD countries between
1980 and 2016 to examine how austerity is associated with turnout rates, non-mainstream
party vote share and party system polarization. Controlling for key economic and political
factors, we find that austerity correlates substantially with core dimensions of party system
change. The vote share of non-mainstream parties is higher by up to 3.5 percentage points
and voter abstention by up to 1.8 percentage points if the government implemented sizeable
fiscal austerity packages during the legislative term. This, in turn, increases polarization
from one election to the next. A more detailed analysis of selected, large fiscal adjustment
episodes also shows that previously small and non-existent parties, often those at the edges
of the political spectrum, are the main beneficiaries of austerity.
The second part of the analysis uses survey experiments in Germany, Portugal, Spain and
the United Kingdom to uncover the micro-level mechanism that explains these macro-level
correlations. The survey experiment also provides a more fine-grained analysis that indicates
which parties lose or benefit most after austerity. The results show that voter responses to
austerity critically depend on the policy alternatives offered by mainstream parties. If both
4
the mainstream left and the mainstream right are in favor of austerity, voters are more likely
to turn towards smaller, non-mainstream parties or abstain from voting than if either the
mainstream left or both mainstream parties oppose austerity. Abstention and defection to
non-mainstream parties thus occurs when none of the mainstream parties provides a credible
anti-austerity alternative.
2 Fiscal policy and party competition
Fiscal adjustments have become common in European fiscal policymaking. While the Euro-
pean debt crisis stands out as a period of extreme fiscal cutbacks, it is actually merely the
endpoint of a longer trend towards austerity in Europe. While countries have historically
followed very different fiscal trajectories and lived with very different degrees of fiscal deficit
(Baccaro, Blyth and Pontusson, Forthcoming), this has changed in the past decades, and
especially so among Continental European countries prior to the establishment of the Euro-
zone. Generally, these adjustments refer to a set of fiscal decisions that aim at reducing the
fiscal deficit by a pre-specified amount. In practice, these fiscal decisions usually entail a mix
of spending cuts (two-thirds) and tax increases (one-third) (Devries et al., 2011). Although
these two dimensions are conceptually different, they tend to occur together and both hurt
many voters, especially when non-progressive taxes, such as value-added tax, are increased.
Fiscal restraint became common for several reasons. International political integration,
the establishment of the Eurozone and the related fiscal rules induce governments to pursue
similar, low-deficit fiscal policies (Konstantinidis, Matakos and Hutlu-Eren, 2019). In this
context, a new, pro-austerity consensus emerged that was actively promoted by powerful
international institutions, such as the ECB or the IMF (Blyth, 2013; Dellepiane-Avellaneda,
2014). In addition, international financial markets impose constraints on fiscal policy, espe-
cially on public deficits and debt (Mosley, 2000). This pushes governments towards techno-
5
cratic solutions in search of economic credibility (Alexiadou, Spaniel and Gunaydin, 2021),
which again constrain fiscal policy (Aklin and Kern, 2020).
Given these constraints and incentives, there is now little evidence that left governments
are less likely to implement fiscal austerity than right governments (H¨ubscher and Sattler,
2017). This is mainly surprising for centre-left parties, as centre-right parties have been
more supportive of low deficits in the past (Cusack, 1999). Although left parties tradition-
ally advocated fiscal flexibility, they nowadays often back economic models of which fiscal
restraint is a fundamental pillar (Hopkin, 2020; Mudge, 2018). As a result, the differences
between mainstream political parties in fiscal policymaking have largely blurred (see also,
Konstantinidis, Matakos and Hutlu-Eren, 2019). This development is well illustrated by the
decisions of social democratic parties in Britain, Germany, the Netherlands or Sweden to
embrace orthodox economic policies during the past decades, even if the ideological founda-
tions of this move may differ (Bremer and McDaniel, 2019).
This lack of competition among mainstream political parties over fiscal policy has im-
portant implications for party systems. As our empirical analysis below will show, political
polarization, a key characteristic of party systems (Sartori, 1976; Dalton, 2008), has in-
creased considerably over the last decades in many countries.2In this paper, we examine
the role that governments and their political decisions can play in fostering party system
polarization, a factor that has largely been ignored in existing work explaining party system
2Other important parameters are the number of political parties, the volatility of electoral
support, and patterns of government composition (Mainwaring and Scully, 1995; Dalton,
2008; Enyedi and Casal B´ertoa, 2020). Since this polarization is partly fed by the decline
of mainstream competitors and rise of non-mainstream parties, our analysis also speaks to
other dimensions of party system change, especially fragmentation and electoral volatility,
even if we do not examine these explicitly.
6
polarization. When structural changes and economic shocks hit voters, governments can try
to mediate the effects of these changes in different ways. Fiscal policy as the government’s
main economic policy instrument, for instance, is decisive in helping low-skilled workers and
the losers of globalization cope with the consequences of structural change and in offsetting
the impact of economic shocks on aggregate economic welfare (Rodrik, 1998; Hays, 2009;
Vlandas and Halikiopoulou, 2021). The fiscal policies that political parties propose and that
governments pursue in reaction to structural change and economic shocks, thus, are impor-
tant to understand the political behavior of voters.
We, therefore, examine how fiscal policy and the fiscal policy positions of the major
parties in the political system affect party system polarization, which is our main dependent
variable. We further examine two individual-level decisions by voters that fuel party system
polarization, specifically voting for non-mainstream parties and not turning out. These two
choices by voters ultimately produce polarization by reducing the share of the vote received
by mainstream parties.
3 How fiscal restraint fosters party system polarization
3.1 Why voters leave: austerity and voter defection from main-
stream parties
When mainstream political parties do not offer clear alternatives in fiscal policy, voters are
likely to defect from these parties. To summarize, we argue that fiscal restraint in a context
of mainstream party convergence leads voters who might otherwise endorse these parties to
prefer other political options (Spoon and Kl¨uver, 2019).
To understand the processes underlying this choice, let us first take a scenario where the
7
mainstream left party is in government and implements fiscal restraint. In this scenario, it is
unlikely that the mainstream right will take a position that is less in favour of austerity than
the mainstream left party in government: parties rarely leapfrog each other ideologically
(Budge, 1994). Hence, voters who disapprove of austerity should not defect to the main-
stream right party if their aim is to express dissatisfaction with the economic policy stance
of the mainstream left party in government. These voters should defect from mainstream
parties altogether.
Next, take a scenario where the mainstream right party is in government. Assuming
that this party takes a pro-austerity position, the mainstream left party could benefit from
taking up a contrasting stance. However, this happens less often than expected due to the
constraints and developments described above. Moreover, even if mainstream left parties
tactically oppose austerity, their past track record is likely to reduce the credibility of such
stances (Horn, 2020). Many voters who oppose austerity therefore do not see the mainstream
left as a valid and credible alternative due to the party’s past policy-making trajectory when
in government (Horn, 2020; Karreth, Polk and Allen, 2013). This also resulted in a dilution
of the party’s ‘brand’ (Lupu, 2014; Bodea, Bagashka and Han, 2021). If the mainstream left
is not seen as the natural owner of issues related to a strong state and welfare policies, the
result is again defection to non-mainstream parties or abstention. Overall, the mainstream
left may not gain substantial amounts of voters who disapprove of government policy even
when the party is in opposition during periods of austerity.3
3This raises the question to what extent voters hold parties accountable for economic
policies if governments are constrained by international integration or if austerity is imposed
by external actors, such as the IMF (Hellwig, 2008). These interventions, however, are
a new phenomenon in industrialized countries and only account for a limited number of
fiscal adjustments. Alonso and Ruiz-Rufino (2020) also find that voters react even more
fiercely and punish governments for giving up democratic control in these cases. Ultimately,
8
This logic does not require that all voters need or want an active fiscal policy and oppose
fiscal restraint (Barnes and Hicks, 2018). In fact, heterogeneous attitudes are a prerequi-
site for polarization. Fiscal policy is most important for those who are affected by struc-
tural change (Jensen, Quinn and Weymouth, 2017; Colantone and Stanig, 2018; Gingrich,
2019). Fiscal attitudes also strongly vary with ideology (H¨ubscher, Sattler and Wagner,
2020; Bansak, Bechtel and Margalit, 2021). Our assumption is that the major center par-
ties traditionally represented voters who are critical of fiscal austerity for either material
or ideological reasons. This is clearly the case for social democratic parties, but this also
includes socially conservative workers who tended to vote for christian democratic parties.
Relatedly, recent research shows that many, albeit not all voters are critical of austerity (e.g.,
Wenzelburger, 2011; Genovese, Schneider and Wassmann, 2016; Talving, 2017; Barta, 2018;
Bojar et al., 2021; Baccaro, Bremer and Neimanns, 2021).
In sum, a history of similar responses to macro-economic challenges by both left- and
right mainstream parties while in government, a credibility crisis of mainstream parties in
general (Mair, 2006), and the left more specifically (Karreth, Polk and Allen, 2013) leads
to voter defection from mainstream parties after episodes of fiscal austerity. The following
hypotheses summarize the implications of this discussion.4
governments are the only ones who can try to change these constraints, e.g. by rolling back
international integration.
4We present the logic in a simplified form using two mainstream parties only. The same
logic applies to coalitions within the same (left or right) political bloc. In case of cross-bloc
coalitions, as we have seen them in Austria or Germany, the effect should even magnify.
Cross-bloc coalitions make it even harder for voters to distinguish the policy stance of the
political parties in the coalition.
9
Hypothesis 1a (macro): Austerity measures reduce mainstream party vote share at the
next election.
Hypothesis 1b (micro): Citizens are less likely to vote for mainstream parties that support
austerity measures than for mainstream parties that oppose such measures.
3.2 Where voters go: Voter defection and polarization
Voter defection from mainstream parties fuels polarization in two ways: indirectly through
abstention and directly through votes for non-mainstream parties. First, traditional support-
ers of mainstream parties can abstain from turning out altogether due to their dissatisfaction
with the parties’ policy trajectory. While the decision to abstain from voting can have many
reasons, disenchantment with the political establishment and the workings of democracy are
among the more prominent determinants at the individual level (Hillen and Steiner, 2020).
We propose that beyond broader sentiments of dissatisfaction and estrangement from pol-
itics, specific policy decisions by parties in government can have a detrimental impact on
political participation. Disproportionate abstention from those who would otherwise sup-
port mainstream parties leads non-mainstream parties to increase their relative vote share,
though of course less than if voters switched directly to these parties.
Second, dissatisfied voters may often defect to a non-mainstream party, if such an option
is available. If the non-mainstream parties are more radical in their positions than main-
stream alternatives, polarization will increase. Radical parties are attractive to those who
oppose austerity as they often advocate an alternative fiscal policy position (R¨oth, Afonso
and Spies, 2018). This applies to both radical-left and radical-right parties. Radical-left
parties, such as Die Linke in Germany or the SP in the Netherlands, are most attractive for
individuals who are disappointed by the economic policies of the mainstream left. Unlike the
mainstream left, the radical left takes an ideological stance against austerity and strongly
10
opposes interference by international economic actors that demand such policies, such as the
IMF or the EU.
Similarly, radical-right parties may attract dissatisfied voters for three reasons. First,
the radical right often promises ‘welfare chauvinism’ that favors the native population at
the expense of immigrants (Vlandas and Halikiopoulou, 2021). As a result, issues where the
radical right has popular and unique positions, such as immigration and the EU, may matter
more. Relatedly, and more importantly, radical right parties most clearly advocate to roll
back globalization and thus to lift the constraints that international integration impose on
domestic economic policy. Finally, the radical right often stands for anti-system politics,
which is potentially attractive for disaffected mainstream voters. Overall, both the radical
right and the radical left can therefore gain votes by strategically positioning themselves as
an alternative to the mainstream parties (Wagner, 2012; De Vries and Hobolt, 2020).
Several examples from the recent past illustrate these proposed patterns. The rising
popularity of UKIP, for instance, has been directly linked to the austerity policies in Britain
(Fetzer, 2019). In other countries, non-mainstream parties emerged or expanded their vote
share in connection with anti-austerity movements during the Eurozone crisis. An exam-
ple is Podemos in Spain, which used the momentum generated by the Indignados, a social
movement taking the streets in the aftermath of the crisis. Other, smaller parties actively
court these movements: in France, both the radical-right Rassemblement National and the
radical-left France Insoumise have tried to attract supporters of the Gilets Jaunes in order
to capitalize on their popular appeal. Our final hypotheses are thus:
Hypothesis 2a (macro): Austerity measures increase polarization at the next election.
Hypothesis 2b (micro): Citizens are more likely to choose non-mainstream parties or to
11
abstain from voting when all mainstream parties support austerity measures than when one
or both maintream parties oppose austerity.
We examine the above hypotheses in two steps. In the next section, we use aggregate
observational data on fiscal consolidations and election outcomes in Western countries since
the 1970s. This allows us to examine how fiscal consolidation has contributed to non-
mainstream party vote, abstentions and ultimately polarization. However, one challenge we
face in this analysis is the lack of good measures of mainstream opposition party positions on
austerity policy. In the subsequent section, we therefore use survey experiments to examine
individual-level voter reactions to fiscal policy proposals by different political parties in four
countries. This allows us to test whether the macro patterns that we find are in fact likely
to be caused by voter responses to fiscal austerity as we propose above.
4 The macro pattern
4.1 Empirical design and data
The first part of our empirical analysis examines national elections from sixteen advanced
economies between 1980 and 2016.5This macro approach is useful because our goal is to ex-
amine the impact of fiscal policy on political changes at the systemic level. The country-level
analysis allows us to do this by capturing the empirical relationship between fiscal policy
and the patterns of national election outcomes and the associated systemic changes. We
5Data on national-level parliamentary elections is from the Comparative Manifesto
Project (CMP). The set of countries is limited by the availability of fiscal consolidation
data and includes: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Ger-
many, Ireland, Italy, Japan, Portugal, Spain, Sweden, the United Kingdom, and the United
States. The number of elections per country (166 in total) varies between 8 (France, United
Kingdom) and 14 (Australia).
12
are aware that such a macro-level approach necessarily compromises on insights about the
underlying mechanisms and the motivations of voter behavior. We therefore complement
the macro analysis with an experimental analysis of individual-level behavior (see section 4).
In line with our hypotheses, we examine three different outcome variables: the vote for
non-mainstream vs. mainstream parties; electoral turnout; and the polarization of the party
system. We identify non-mainstream parties based on the party family classification by the
CMP project (see also Spoon and Kl¨uver, 2019).6Mainstream parties in our context are
those parties that support the current economic order and the related economic policies,
notably low deficits and fiscal restraint. We classify social-democratic, christian-democratic,
conservative, liberal and agrarian parties as those parties to which this definition applies.7
We use the share of eligible voters who do not participate in an election as a measure of
electoral abstention (Armingeon et al., 2019). To measure the polarization of voters, we use
the dispersion of positions of political parties, weighted by their vote shares. This indicator
increases when more voters vote for parties at the fringes of the political spectrum.8We use
data from expert surveys to measure the positions of political parties on the left-right scale.9
6The CMP uses the following classifications: ecological; socialist or other left; social-
democratic; liberal; christian-democratic; conservative; nationalist; agrarian; ethnic and re-
gional; special issue; and diverse electoral alliances.
7This definition is the same as in Spoon and Kl¨uver (2019), with the exception of ‘socialist
and other left’ parties. We classify those as non-mainstream because they position themselves
against the economic order and fiscal austerity.
8Specifically, we calculate this measure as pPn
i=1 vi(pip)2, where pis the weighted
mean of all the parties’ left-right ideological positions; piis the ideological position of party
i,viis the share of votes that party ireceives in an election, and nis the number of parties
that participate in the election.
9Specifically, we use the left-right index from parlgov.org, which integrates the results from
various expert surveys, including for instance the Chapel Hill expert surveys. The parlgov
13
Figure 1: Average non-mainstream party vote, abstentions and polarization over
time
15
20
25
30
Non-Mainstream Vote
1980
1985
1990
1995
2000
2005
2010
2015
15
20
25
30
Abstention
1980
1985
1990
1995
2000
2005
2010
2015
1.8
1.9
2
2.1
2.2
Polarization
1980
1985
1990
1995
2000
2005
2010
2015
Note: Average values across the 16 countries per year for each variable.
Figure 1 shows how these outcome variables evolved over time in the countries that we ex-
amine. The patterns for all three variables are straightforward. On average, the vote share
for non-mainstream parties doubled between the 1980s and today. The non-mainstream
party vote share increases sharply from the mid-80s to 2000 and from 2009 onwards. Ab-
stentions also gradually increased from below 20% at the beginning of the period to almost
30% at the end. This pattern is more evenly distributed than for the other outcome vari-
ables, with a steady and fairly uniform increase. Finally, average voter polarization increases
considerably during our period of analysis. As for non-mainstream party vote, the sharpest
increases occur between the mid-80s and early 2000s and again from the mid-2000s onwards.
For our independent variable – fiscal consolidation – we use the events-based measure
originally developed by Devries et al. (2011) and updated by Alesina, Favero and Giavazzi
(2019).10 Event-based measures of fiscal consolidation qualitatively identify the timing and
index is time-invariant, which allows us to isolate the effect of voters on polarization.
10Note that we use government policy rather than mainstream party positions as our key
predictor. Hence, our main test concerns actual policy rather than party programmes or
14
magnitude of fiscal consolidation packages using policy documents from governments and
international organizations. This is now the standard approach of measuring fiscal consoli-
dations because it directly captures fiscal policy decisions by governments (Alesina, Favero
and Giavazzi, 2019).11 Out of the 166 legislative periods in our dataset, 91 periods include
at least one consolidation event. Among these, the degree of fiscal consolidation varies con-
siderably. A median (average) consolidation package aims at reducing the fiscal deficit by
1.9% of GDP (2.44%) with a standard deviation of 2.21% of GDP.12 .
We include a range of control variables, which largely follow from the literature on party
system change and polarization discussed in section 2. These include macroeconomic condi-
tions represented by real GDP growth and the unemployment rate, the degree of international
openness of a country and net migration. These variables enter our model as means for each
legislative period. We also account for the permissiveness of the electoral system by includ-
ing controlling for the electoral system (majoritarian vs. proportional) and the magnitude
of electoral districts. These variables mostly account for cross-country variation, while our
focus is on on over-time variation within countries. Nonetheless, they account for changes
after electoral systems change (Best, 2012) and possibly affect how easily voters switch from
political rhetoric. Implicitly, we therefore assume, building on existing research, that both
mainstream parties tend to endorse austerity in times of crisis, based on a convergence of
economic policy models (Hopkin, 2020). Below, we discuss the limitations of existing data
measuring policy positions but nevertheless describe empirical results from models using
positions rather than policy.
11In contrast, previously used measures that were based on the cyclically adjusted primary
balance mix government decisions and macro-economic developments not directly related to
fiscal policy decisions.
12The maximum is 11.9% of GDP in Portugal 2011-2015, but all other consolidations are
below 8% of GDP. See also Table A1 and Figure 2.
15
one party to another.13 Table A1 shows the summary statistics of all variables.
Since we are interested in the gradual change in electoral behavior over time, we use the
changes in the outcome variables from one election to the next as the dependent variables.
This also addresses the econometric problem that the outcome variables are not stationary.14
Our analysis uses the following empirical specification:
yi,t =β0+β1Austerityi,t1+β0
2Xi,t1+dt+ci+i,t
where irefers to the country and trepresents an election; yi,t refers to either votes for non-
mainstream parties, electoral abstentions, or polarization; Austerityi,t1is the amount of
fiscal consolidation in the legislative period prior to the election; Xi,t1includes the control
variables; dtare period-fixed effects; ciare country-fixed effects; and i,t is an error term. We
also use alternative empirical models, notably models in levels rather than differences and
with a lagged dependent variable, and with a time trend. As we show in the Appendix, the
results from these models are the same.
4.2 Results
Table 1 presents our estimation results. For each outcome variable, we present three spec-
ifications: one without controls, one with economic and political control variables, and one
with country- and period-fixed effects. The results show that the vote share for the non-
mainstream parties, electoral abstentions and polarization increase from one election to the
next when the government implements a fiscal consolidation packages during the legislative
term. This effect is statistically significant and robust across different specifications.
13Data for the control variables come from Armingeon et al. (2019) and Bormann and
Golder (2013).
14The panel unit root tests in table A2 reject the null hypothesis of a unit root for the
differenced, but not for the undifferenced outcomes variables.
16
Table 1: Effect of austerity on party systems
∆Non-mainstream ∆Abstentions ∆Polarization
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Consolidationt10.693*** 0.735*** 0.583** 0.297** 0.372** 0.280 0.019*** 0.018*** 0.015**
(0.225) (0.261) (0.280) (0.116) (0.146) (0.177) (0.006) (0.007) (0.007)
Growtht10.283 0.662* 0.326* 0.270 0.003 0.012
(0.266) (0.375) (0.195) (0.261) (0.006) (0.008)
Unemploymentt1-0.036 0.192 -0.082 -0.230 0.003 0.004
(0.176) (0.316) (0.105) (0.190) (0.004) (0.007)
Globalizationt10.124** 0.242 0.031 0.094 0.001 0.013**
(0.058) (0.215) (0.046) (0.196) (0.001) (0.005)
Migrationt10.000 0.004 -0.004** -0.005 0.000 0.000
(0.003) (0.004) (0.002) (0.003) (0.000) (0.000)
Proportionalt-1.588 -5.540 -2.057 -5.908 0.032 -0.033
(4.515) (6.344) (1.853) (5.047) (0.073) (0.187)
Mixedt-0.063 2.646 0.503 -0.666 0.013 0.165
(1.447) (4.441) (1.228) (3.921) (0.044) (0.116)
DisMagnitudet0.613 2.687 0.687 0.833 -0.019 0.059
(2.243) (2.574) (0.763) (1.577) (0.033) (0.055)
Constant 0.343 -9.588* -22.802 0.666* -1.189 -2.002 0.003 -0.108 -1.147***
(0.510) (4.869) (17.840) (0.357) (3.733) (16.748) (0.012) (0.116) (0.410)
Country FE No No Yes No No Yes No No Yes
Period FE No No Yes No No Yes No No Yes
R20.04 0.07 0.20 0.02 0.09 0.16 0.07 0.10 0.24
F9.508 2.019 2.730 6.569 2.750 1.405 9.532 2.084 1.657
p0.002 0.047 0.000 0.011 0.007 0.101 0.002 0.040 0.029
N166 166 166 166 166 166 166 166 166
Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1.
17
The magnitudes of the estimated effects are substantively important. The results mean
that a median consolidation package, which aims at reducing the fiscal deficit by 1.89%
of GDP, increases votes for non-mainstream parties by 1.3 percentage points on average.
A large package that is one standard deviation above the median, which aims at reducing
the fiscal deficit by 4.16%, increases non-mainstream party votes by 2.9 percentage points.
The effect of austerity on electoral abstention is smaller. A median consolidation package
is predicted to increase abstention by 0.6 percentage points, while a large package increases
abstention by 1.2 percentage points.
These effects then translate into an important increase in the polarization of the party sys-
tem. To illustrate the impact graphically, we plot the predicted effect of fiscal consolidations
on polarization in Figure 2 across the empirically observable distribution of consolidations.
It shows that, for instance, a large consolidation package (one standard deviation above the
median consolidation) increases polarization by 0.1 units. This effect increases up to 0.15 for
very large packages that reduce the deficit by 7-8% of GDP.15 Compared to the empirically
observable increase in polarization during the past decades, this estimated impact of austerity
on polarization is quite substantial. Figure 1, for instance, shows that average polarization
across countries has increased by 0.25 units between 1980 and 2015. And as Table A1 shows,
the average increase in polarization during an electoral period in our dataset is 0.028. A me-
dian austerity package, therefore, raises the average growth in polarization by a factor of four.
Among the control variables, globalization has the most consistent effect and increases
non-mainstream party vote and polarization, although this effect is not robust across spec-
ifications. The variables representing macroeconomic circumstances do not have an effect
15Most consolidation packages are below 8% of GDP. One package in Portugal during
2011-2015 takes the value of 11.9%, which is a unique and extreme case. We nonetheless
include it in our plot because it is part of the empirically observable distribution.
18
on the outcomes. This suggests that the impact of austerity does not simply capture the
impact of the bad economic conditions that are often (albeit not always) associated with
fiscal austerity packages.
Figure 2: Predicted change in polarization over empirically observable degrees of
austerity
median
consoli-
dation
one std.
above
median
two std.
above
median
0
.2
.4
.6
Fraction
0
.1
.2
.3
.4
ΔPolarization (predicted)
0 2 4 6 8 10 12
Fiscal consolidation
Note: Prediction based on model (7) in table Table 1; solid line shows predicted change in
polarization (left y-axis) with 90% confidence intervals; bars show the distribution of fiscal
consolidations (right y-axis).
A series of supplementary analyses examines the robustness of these findings. First, we
examine the sensitivity of our results to alternative model specifications and estimate models
in levels with a lagged dependent variable in Table A3. The results are very similar to the
ones presented in the main text. Figure A4 shows that the results do not depend on the
inclusion of a particular country. Second, we disaggregate the non-mainstream party vari-
able and examine different non-mainstream parties separately in Figure A1 and Table A4.
The results suggest that most of the effect of austerity in non-mainstream parties works
through left parties and the groups of ‘other’ parties without a specific family label. Third,
19
we analyze the characteristics of fiscal austerity packages in greater detail in Tables A5 and
A6. We do not find evidence that spending- or tax-based consolidations affect elections
differently. Fourth, we also disaggregate consolidation by the timing during the legislative
term. Consolidations in the year before the election year seem to have the strongest impact,
but consolidations at the beginning of the term still considerably impact the election. Fifth,
Table A7 and Figure A2 examine how the effect of austerity on the outcome variables differs
across sub-periods of five years. It should be noted that the number of observations and
austerity instances in each period is fairly small. The results for non-mainstream vote and
polarization suggest that there is an upward trend in the effect of austerity, with a temporary
decline in the late 1990s / early 2000s. The impact of austerity is particularly strong after
2010, but it was already substantial throughout the 1990s. As Figure A3 shows, these were
also the two periods in which most austerity episodes occurred.
Finally, our key variable, consolidation events, reflects government policy rather than
party positions. We opted for this policy variable because it captures what parties actually
do rather than what they say. To address the role of policy positions more directly, we turn
towards a more qualitative assessment of key cases and an experimental analyses below.
5 Who wins? Who loses? Evidence from large fiscal
adjustments
To further substantiate our macro-level results and to link the analyses above to our micro-
level analysis below, we look into selected electoral cycles during which large fiscal adjust-
ments aiming at deficit reductions of 5% of GDP or more were implemented. This yields
a list of ten large adjustment episodes, with five belonging to the period before and five to
the period after the ‘Great Recession’. Looking at electoral cycles from both periods will
show that the mechanisms are not unique to the extreme economic crisis that started in 2008.
20
Table 2: Legislative periods with cumulative austerity >5% of GDP (pre 2008 and post
2008 crisis)
Austerity ∆ Gov Support ∆NMP ∆Abstention ∆Polarization
Pre-2008 Crisis
Finland (1991-1995) 7.9% -1.2% 1.9 -0.2% 0.07
Sweden (1994-1998) 6.5% -8.9% 5.6 5.4% 0.2
Belgium (1981-1985)* 5.9% -4.7% -5.5 0.9% -0.02
Ireland (1982-1987) 5.9% -15% 4.3 -0.4% 0.17
Italy (1992-1994) 5.8% -46.6% 10.8 1.2% 0.51
Post-2008 Crisis
Portugal (2011-2015) 11.9% -11.7% 8.2 2.2% 0.23
Ireland (2011-2016) 10.1% -23.5% 13.5 4.4% 0.4
Ireland (2007-2011) 8.4% -29.6% 8.7 -2.9% 0.17
Spain (2011-2015/2016) 7.8% -13.2% 14.5 -4.3%/3.4% 0.59
Belgium (2010-2014)* 5.7% -1.5% -5.2 -0.2% -0.10
Note: Austerity = cumulated consolidation during electoral term; ∆ Gov Support = change
in vote share of parties in government; ∆NMP = change in non-mainstream party vote
share; ∆ Abstention = change in turnout. Data on fiscal consolidation events by Alesina et
al. (2019), other by www.parlgov.org and the Comparative Manifesto Project. * Note that
in Belgium, voting is compulsory, which means that turnout is traditionally high and there
is very little change in turnout over time.
Table 2 lists the countries, the respective legislative period and the cumulative size of
the adjustment packages implemented during a given electoral cycle as well as changes in
non-mainstream party vote, changes in abstention and polarization.16 In what follows, we
provide a synthesized account of how austerity, implemented by mainstream parties and
uncontested by mainstream opposition parties affected the mainstream party vote, turnout,
and polarization. In addition, we highlight developments in a number of countries, which
serve to exemplify the general trends.
Mainstream party support and positions: For all elections after substantive fiscal adjust-
ments, the vote share of parties in government declined, often considerably. The combined
16Table A8 and Table A9 in the Appendix provide a detailed overview of losses and gains
of all parties for these cases.
21
decline can be as little as 1 percentage point (as in Finland in 1995) or as high as 30 percent-
age points (as in Ireland in 2011).17 A closer look also confirms that the mainstream parties
in opposition presented a credible alternative for some, but definitely not for all dissatisfied
voters. In almost all of the cases, the mainstream opposition could not fully absorb the loss
of support for government parties. For instance, the Finnish Social Democrats or the the
Portuguese Socialists who were in opposition in 1995 and 2015, respectively, (see Table A8
and Table A8 in the appendix) gained voters after the government implemented austerity.
However, their increase in vote share was substantially lower than the decline in the com-
bined vote share for parties in government.
Non-mainstream party support: The difference between government party losses and
mainstream opposition gains was absorbed by non-mainstream parties. All but one auster-
ity episode was followed by an increase in the vote share of non-mainstream parties. Prior to
the Great Recession, the increase in non-mainstream party vote varied between 2 percentage
points in Finland to slightly over 5.5 percentage points in Sweden. After the Great Recession,
the increase in non-mainstream party vote varies between 8 percentage points in Portugal
and 14.5 percentage points in Spain. The type of non-mainstream parties that benefited
from austerity vary widely in their ideology. While in Finland leftist fringe parties, such as
the Social Democratic party and the Left Alliance, experienced an increase in voter support,
Sweden saw an increase in the support of the conservative Christian Democrats (Kd) and
the leftist/communist ansterpartiet. After the Great Recession, we often see parties that
positioned themselves considerably to the left of the mainstream parties winning votes, e.g.,
Podemos (0% to 12.7%) in Spain, the Portuguese Bloco de Esquerda (5.4% to 10.6%), or the
17The general election of 1994 in Italy was the first election after the discovery of Tan-
gentoppoli (scandals related to corruption and party financing at the highest levels of gov-
ernment) and the ensuing legal processing of the scandal (Mani pulite). These events led
to the collapse of the Italian Christian Democrats and the post-WWII Italian party system
more generally and overshadowed the austerity measures. We thus dismiss this case in our
discussion.
22
Irish Worker’s Party (prior to the Great Recession).
Turnout : We also see an increase in abstention in five out of the ten cases presented in
Table 2. Here, it should be noted that voting is compulsory in Belgium, which stabilizes
turnout. More broadly, the tendency in abstentions after fiscal adjustments is in the expected
direction, although less pronounced as for non-mainstream party vote.
6 The micro behavior
6.1 Survey and experiment design
In the last part of our analysis, we aim to provide solid micro-level evidence of the mecha-
nisms creating the macro-level patterns that we describe in the previous sections. In a survey
experiment fielded in four countries, we examine voter reactions to different fiscal austerity
proposals from the main centre-left and centre-right parties. This means that we can test
which parties voters support if both mainstream parties advocate austerity.
This experimental approach is useful because it allows us to vary the positions of the
main political parties towards austerity. In an observational study, it is difficult to assess
how the main parties’ positions on austerity matter for vote choice as many party- and
country-specific factors co-vary together with the policy option pursued. Indeed, a key
counterfactual, namely that either both mainstream parties or even just the mainstream left
oppose austerity, is arguably rarely observed. Moreover, an experiment allows us to present
specific and clear policy stances by mainstream parties. In an experiment, we can be sure
that it is responses to the policy dimension we manipulate that drive behaviour. Moreover,
as argued above it is difficult to gather data on opposition party responses to government
austerity programs.
We conducted original survey experiments in four countries: Britain, Germany, Portugal
23
and Spain.18 The four countries were chosen for multiple reasons. First, a survey in multiple
countries allows us to uncover commonalities in responses across different contexts, which
enhances our confidence into the generalizability of the results. Second, voters in the differ-
ent countries were exposed to differing degrees of austerity in the recent past. Portugal and
Spain experienced a debt crisis and received international bail-out packages; the UK was hit
by a short-term financial crisis and long-term austerity, but was not bailed out internation-
ally; and Germany has proved comparatively resilient since 2008. Third, the four countries
also have different party systems that create variation in the types of contestation around
austerity. In Spain and Germany, party-based opposition to austerity is strongest on the
radical left (Podemos and Die Linke). In Portugal, the radical left is opposed to austerity,
but so is, in a more moderate way, the Socialist Party. In the UK, Labour used to take
a market-friendly approach in the last decades, but moved towards a strong anti-austerity
stance during the Corbyn-years.
Table 3: Main political parties per country
Center Left Center Right
Germany Social Democrats (SPD) Christian Democrats (CDU/CSU)
Portugal Partido Socialista (PS) Partida Social Democratica (PSD)
Spain Partido Socialista (PSOE) Partido Popular (PP)
UK Labour Party Conservative Party
We conducted an experiment embedded in population-based surveys. The surveys were
implemented by respondi, making use of different country-specific online access panels. Re-
spondents were selected from these access panels; quotas based on age and gender were
implemented. The sample is restricted to voting-age nationals. In each country, we surveyed
18We also ran the experiment in Italy just after its election in 2018. However, the experi-
ment was difficult to adapt to that country given that the government was in transition and
two non-mainstream parties dominated the party system. While we used Forza Italia and
the Partito Democratico in our experiment, these were clearly not the most relevant parties
in the context anymore.
24
around 2,200 individuals.19 In the experiment, we presented respondents with hypothetical
scenarios concerning policy proposals by the two main parties in each country. Table 3 lists
the main center left and center right parties in the countries covered by our survey exper-
iment.20 In the experiment we also varied which party was described as the government
party and which as the main opposition party. We do this to be able to examine whether the
credibility of the announcement among voters differs for government and opposition parties.
To illustrate the details of the experiment for the UK, we present a possible vignette
that respondents saw after an introductory screen in table 4.21 Within the same challenging
context of high deficit and increasing debt, the vignettes presented respondents with the
following varying information: party in government, main opposition party, policy proposal
of each party. The treatment (policy proposal in the second row) could take one of the
following two values: ‘cut spending and increase taxes’ or ‘keep government spending stable
without tax increases’. This yields in four different combinations of policy proposals: (1)
both parties want to cut spending, (2) the center-left party keeps spending as is, while the
center-right party cuts spending, (3) the center-right keeps spending as is, while the center-
left cuts spending, and (4) both parties keep spending as is. We focus on the comparison
between the ‘both cut’ scenario and the two counterfactual scenarios (2) and (4), where either
19The appendix provides more details about the country specific panels and other aspects
of the data collection process.
20In Spain, PSOE and PP are historically the main governing parties, and no other party
has held the office of prime minister. We therefore decided against including newer competi-
tors (Ciudadanos and Podemos).
21The experiment was introduced as follows: ‘We will now show you three different, pos-
sible scenarios how the main political parties in Britain respond to the high fiscal deficit and
growing public debt. In each scenario, there will be one policy proposal by the government
party and one by the main opposition party. The government and the opposition parties
can propose similar policies or different policies, depending on political circumstances. The
scenarios also vary in terms of which party is in government. Sometimes, the Conservative
Party is in government, and the Labour Party is the main opposition party. And sometimes,
the Labour Party is in government, and the Conservative Party is the main opposition party.
Please indicate which party you would support in each scenario.’
25
the mainstream left or both mainstream parties keep spending as is. Below, we disregard
option (3), since it is unrealistic that the center-right keeps spending as is while the left cuts.
However, we kept this option in the design of the experiment for sake of completeness.
Table 4: Experimental setup
Government Main Opposition Party
Labour Party Conservative Party
Policy proposal Keep government spending
stable without tax increases
Cut spending and increase
taxes
Each respondent was presented with three – randomly selected – vignettes out of the eight
possible vignettes (four possible proposal vignettes ×two possible government-opposition
assignments as outlined above). After each vignette our respondents were exposed to they
had to indicate which party they would vote for given the policy scenarios presented. Specif-
ically, we asked: ‘For which party would you vote in the next election?’. This became our
outcome variable (DV).22 All political parties were included as response options, not just the
two main parties. We also allowed respondents to state ‘Would not vote’ and ‘Don’t know’.
Respondents’ reactions to these vignettes give us an idea of which policy proposal is more
attractive to them in different combinations and, more importantly how the combination of
party and policy proposal influences their vote choice.
6.2 Results
Figure 3 presents the results of the experiment and is based on a multinomial logistic re-
gression using vote choice as dependent variable and the policy treatment as independent
variables. The baseline category is the scenario in which both parties propose to keep spend-
ing as it is. Here, we code non-mainstream parties as in the macro analysis, namely as
radical-right, radical-left and Green competitors. We always control for simple demograph-
22Given that we have three assessments per respondent, the following analyses cluster
standard errors by respondent.
26
ics (age, education, gender and income) as well as for party choice in the prior election as
well as economic ideology.
Figure 3: Fiscal consolidation and voter flows
CR CL Oth. ms. Non-ms. Abst.
-.15
-.1
-.05
0
.05
.1
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
Germany
CR CL Oth. ms. Non-ms. Abst.
-.15
-.1
-.05
0
.05
.1
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
UK
CR CL Oth. ms. Non-ms. Abst.
-.15
-.1
-.05
0
.05
.1
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
Spain
CR CL Oth. ms. Non-ms. Abst.
-.15
-.1
-.05
0
.05
.1
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
R cuts
Both cut
Portugal
Treatment effects on vote choice (baseline: both keep)
.
Note: Multinomial logistic regression with vote choice as DV and treatment as IV.
CR=Centre-Right, CL= Centre left, ms=mainstream. Three of four policy treatments
shown, baseline category: both parties propose to keep spending. Policy treatments in-
teracted with whether the left or right wing party was said to be in government. Effects
shown averaging over these two conditions. For full results with all parties, see Figure A5
to Figure A8
As noted above, we also varied which of the two parties was described as the government
party. In our analyses, this is interacted with the austerity treatment, and the results below
average over the government and opposition conditions. We do so because we did not find
any statistically significantly different reactions to policy proposals depending on whether
the party was described as governing or not. While this is consistent with our claim above
27
that voter responses to austerity proposals do not depend on who is in government, we do not
see this as strong evidence, as it could just be that our government-opposition treatment was
somewhat abstract in the context of a hypothetical scenario. We now turn to the key results.
The results support H1b, which stated that mainstream parties that support austerity
receive less support. When only the centre-right cuts while the centre-left promises to main-
tain current levels of spending, the centre-left does particularly well (and the centre-right
particularly badly). However, the overall support for mainstream parties is similar when
both parties propose maintaining current levels or when only the left does. This is easily
visible when looking at the effects of the categories capturing ‘other mainstream parties’,
‘other non-mainstream parties’ and ‘abstention’ (Figure 3).
The results also support H2b: what leads voters to abandon the left without rewarding
the right is a context in which both parties support cuts. This will increase fragmentation.
Thus, Figure 3 shows that the vote for other parties increases in the ‘both cut’ scenario in
all party systems, be they mainstream or non-mainstream parties. Abstention increases as
well, albeit to a lesser extent. The effects of both parties promising austerity on voting for
other parties and on abstention are comparable across countries.
In terms of polarization, we can see that the vote for non-mainstream parties increases
across the board, even if not significantly in Portugal. In other words, voters’ reactions to the
experiment lead to more polarized party landscapes. More detail is provided in the Appendix,
which shows full results by country. There, we can see that in Germany the left competitor
party (Die Linke) benefits most if both main parties propose to cut spending (see Figure A5
in the Appendix). The same pattern exists in Portugal (Figure A8, appendix), where the
leftist ‘Bloco de Esquerda’ benefits most from a scenario in which both main parties propose
to cut. In Spain Ciudadanos and Podemos, two relatively new competitors benefit from
28
voters defecting the main parties (see Figure A7 in the appendix). Overall, voters also move
to comparatively centrist parties such as the Lib Dems in the UK or Ciudadanos in Spain.
While there is movement to the extremes, voters also defect to mainstream alternatives.
Hence, as expected the situation where both parties cut is particularly conducive to
engendering changes in voter decision-making, at least in terms of other party vote, non-
mainstream vote and abstention. This scenario essentially emulates the situation most par-
ties faced in the aftermath of the Eurozone crisis or during any other prolonged economic
and fiscal crisis. The finding is also in line with the results from the macro-level analysis.
Figure 4: Aggregate Effects of treatment conditions
-.05 0 .05 .1
Portugal
Spain
UK
Germany
Non-mainstream parties
R cuts Both cut
-.01 0 .01 .02 .03 .04 .05
Portugal
Spain
UK
Germany
Abstention
R cuts Both cut
-.2 -.1 0 .1 .2
Portugal
Spain
UK
Germany
L-R polarization
R cuts Both cut
Note: Non-mainstream vote share is the difference in the proportion of respondents
voting for non-mainstream parties as defined in the previous sections. Abstention
measured as the proportion of non-voters in each treatment condition. Left-right
polarization measured as the weighted standard deviation of left-right positions (as
provided by the Parlgov database).
Finally, and to link the micro-analysis back to the macro-level findings, we present
aggregate-level results from each proposal type in Figure 4. For this, we treat each vi-
29
gnette type as a hypothetical election and present the aggregate results for the four outcome
variables of our macro analysis: the change in vote share of non-mainstream parties, ab-
stention, and left-right polarization based on Parlgov-provided expert scores for parties. For
non-mainstream party vote, we can see a clear and strong increase in all countries, especially
when both parties pledge to implement an austerity package. The effects on turnout are
smaller, which coincides with the macro results. Most importantly, polarization increases
compared to the other two experimental scenarios across all four countries, with the most
pronounced effects in Germany. The reduced level of polarization when only the right pro-
poses to cut can be explained by the resulting increased support for the mainstream left,
which lowers polarization compared to when neither party proposes to cut spending.
Overall, the aggregated effects from the experimental analysis are consistent with the
findings from our macro analyses in the previous sections. They confirm that economic
policy-making, and in particular fiscal consolidation, have a significant impact on the party
landscape in representative democracies.
7 Conclusion
In this paper, we use macro- and micro-level analyses to study the political effects of auster-
ity. We focus on the consequences of austerity policies by mainstream political parties for
voter behavior and systemic implications of austerity. We find that votes for non-mainstream
parties decrease and electoral abstention increases if mainstream parties implement austerity.
As a result, political polarization increases. Voters who are dissatisfied with fiscal policies
and who do not find a credible anti-austerity alternative among the mainstream parties turn
towards smaller existing or new parties. Since parties at the edges of the political spec-
trum advocate most strongly against austerity, they often win particularly strongly, which
increases political polarization.
30
These results have important consequences for our understanding of the long-term ef-
fects of fiscal policy. Most existing work has examined how economic conditions, such as
financial crises or trade shocks, which are partially beyond the control of governments, affect
parties. We highlight instead how the policy choices made by the key political parties affect
the stability of the party system. The failure of mainstream parties to offer distinct fiscal
policy propositions to voters can have important long-term consequences for political stabil-
ity. Greater polarization inhibits the ability to build viable and stable coalition governments
and leads to more difficulties in putting together a coherent government policy agenda, ulti-
mately increasing political instability (Konstantinidis, Matakos and Hutlu-Eren, 2019) and
policy gridlock (Lee, 2015). Ironically, these political developments then also undermine
the effectiveness of fiscal institutions that aim at limiting public spending and keeping fiscal
deficits low (Wehner, 2010; Frye, 2010).
Naturally, the question arises how long-lasting the effects of austerity on party systems
will be. The answer, at this stage, can only be speculative. However, qualitatively assessing
the mechanisms driving party system change reveals that a drop in turnout usually precedes
the establishment of a new party, which will then stand in future elections. Such processes
can evolve over several electoral cycles, which implies that the changes in party landscapes
are likely here to stay. More broadly, once non-mainstream parties enter into parliament,
e.g. after an austerity episode, this consolidates their political standing over time (Bischof
and Wagner, 2019). Austerity policies, therefore, can have profound longer-term effects
that analyses of the short-term effects on government popularity cannot uncover. Even if
austerity does not lead to immediate government breakdown, the policies still contribute to
the reshuffling of votes within the party system.
31
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... This mismatch helps to make sense of some of the political turmoil that we observed in Europe in the wake of the Great Recession: as mainstream parties have adopted austerity, voters have increasingly turned to alternatives on the far left and far right of the political spectrum (Fetzer, 2019;Hübscher et al., 2020). ...
... As austerity has become the predominant response to the economic crisis, political actors have prioritized a policy -lowering government debt -that the public cares very little about. In line with other emerging research(Bojar et al., 2018;Fetzer, 2019;Hübscher et al., 2020), our results show that such policies can have higher political costs for governments that implement them than much of the existing literature suggests. It helps to explain the rise of anti-austerity parties, movements, and politicians like Syriza, the Indignados, or Jeremy Corbyn, and it is crucial to understand political conflicts in Europe today. ...
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