@article{ArdanazHallerbergScartascini, author = {Ardanaz, Mart{\´i}n and Hallerberg, Mark and Scartascini, Carlos}, title = {Fiscal consolidations and electoral outcomes in emerging economies: Does the policy mix matter? Macro and micro level evidence from Latin America}, series = {European Journal of Political Economy}, volume = {Volume 64}, journal = {European Journal of Political Economy}, number = {September 2020, 101918}, doi = {10.1016/j.ejpoleco.2020.101918}, abstract = {Do voters punish governments that introduce fiscal "austerity" measures? If so, does voter response vary according to the composition of fiscal adjustments? The empirical literature on the political economy of fiscal adjustments, which is mostly OECD-based, argues that consolidations do not have significant electoral consequences. In contrast, we find that voters punish fiscal consolidations at the polls in Latin America. To explain this result, we focus on the way fiscal adjustments episodes are implemented, both in terms of their design (taxes vs. spending) and timing. Such episodes rely fundamentally on increasing tax rates and bases of indirect taxes (such as the VAT) that hit broad segments of the population. Moreover, these policies are often implemented when politicians have no choice but to consolidate, that is, under severe economic circumstances. These macro results are corroborated with micro evidence from an original survey experiment that measures voter's fiscal policy preferences over the business cycle in seven countries across Latin America. The experimental evidence shows that respondents prefer expenditure cuts to tax increases during downturns, which is the opposite of the type of consolidations that countries typically pursue.}, language = {en} } @techreport{ArdanazHallerbergScartascini, type = {Working Paper}, author = {Ardan{\´a}z, Mart{\´i}n and Hallerberg, Mark and Scartascini, Carlos}, title = {Research Insights: When Fiscal Adjustments Must Be Made, Do Voters Care Which Policy Is Used?}, edition = {\#101}, publisher = {Inter-American Development Bank (IDB)}, doi = {10.18235/0005292}, abstract = {Fiscal adjustments, aimed at resolving imbalances that can lead to an economic crisis, have a high political cost in Latin America and the Caribbean. Fiscal consolidations in the region generally focuses on raising indirect taxes, such as the value added tax (VAT), which are relatively easy to collect. Experimental evidence, however, indicates that citizens would prefer to reduce public spending rather than increase taxes. The countries of Latin America and the Caribbean must invest in fiscal tools that give them more room to maneuver in times of economic crisis and thus reduce negative impacts on electoral results.}, language = {en} }