Despite widely held views on fiscal adjustment as a political minefield for incumbents, the empirical literature on the issue has been surprisingly inconclusive. A crucial variable that has been often overlooked in the debate is partisan politics. Building on the micro-logic of Albert...

The German social democratic party initiated in 2003 the greatest overhaul of labour market legislation in decades, severely cutting unemployment benefits and slashing employment protection legislation. How can we explain this radical policy shift? This paper will present a counter-intuitive...