02537cas a2200337 a 4500 AALejournalIMF021652 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513573724 1018-5941 BD-DhAAL BD-DhAAL Alesina, Alberto. Austerity and Elections / Alberto Alesina, Gabriele Ciminelli, Davide Furceri, Giorgio Saponaro. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (70 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Conventional wisdom holds that voters punish governments that implement fiscal austerity. Yet, most empirical studies, which rely on ex-post yearly austerity measures, do not find supportive evidence. This paper revisits the issue using action-based, real-time, ex-ante measures of fiscal austerity as well as a new database of changes in vote shares of incumbent parties. The analysis emphasizes the importance of the 'how'-whether austerity is done via tax hikes or expenditure cuts-and the 'who'-whether it is carried out by left- vs. right-leaning governments. Our main finding is that tax-based austerity carries large electoral costs, while the effect of expenditure-based consolidations depends on the political-leaning of the government. An austerity package worth 1% of GDP, carried out mostly through tax hikes, reduces the vote share of the leader's party by about 7%. In contrast, expenditure-based austerity is detrimental for left- but beneficial for right-leaning governments. We also find that the electoral cost of austerity-especially tax hikes-can be contained if it is implemented during good economic times. Mode of access: Internet Foreign Exchange imf Informal Economy imf National Government Expenditures and Related Policies imf Taxation, Subsidies, and Revenues imf Underground Econom imf Ciminelli, Gabriele. Furceri, Davide. Saponaro, Giorgio. IMF Working Papers; Working Paper ; No. 2021/121 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/121/001.2021.issue-121-en.xml IMF e-Library