This study provides empirical evidence that the costs of austerity crucially depend on the level of private indebtedness. In particular, fiscal consolidations lead to severe contractions when implemented in high private debt states. Contrary, fiscal consolidations have no significant effect on...

This study provides empirical evidence that the costs of austerity crucially depend on the level of private indebtedness. In particular, fiscal consolidations lead to severe contractions when implemented in high private debt states. Contrary, fiscal consolidations have no significant effect on...

Using a novel regional database covering over 200 elections in several European countries, this paper provides new empirical evidence on the political consequences of fiscal consolidations. To identify exogenous reductions in regional public spending, we use a Bartik-type instrument that...