The Electoral Consequences of Large Fiscal Adjustments

The conventional wisdom regarding the political consequences of large reductions of budget de…cits is that they are very costly for the governments which implement them: they are punished by voters at the following elections. In the present paper, instead, we …nd no evidence that governments which quickly reduce budget de…cits are systematically voted out of o¢ ce in a sample of 19 OECD countries from 1975 to 2008. We also take into consideration issues of reverse causality, namely the possibility that only "strong and popular" governments can implement …scal adjustments and thus they are not voted out of o¢ ce "despite" having reduced the de…cits. In the end we conclude that many governments can reduce de…cits decisively avoiding an electoral defeat.