The Politics of Fiscal Consolidation
Anecdotal evidence shows that government parties often incur severe electoral losses after implementing fiscal austerity measures. Recent examples of such punishment effects can be found in Portugal, Spain and Ireland during the Eurocrisis. Yet, political economy research finds that the electoral risk associated with fiscal consolidation measures is small or even nonexistent. To investigate the sources of these contradictions, we reassess the connection between electoral vulnerability and fiscal retrenchment in different ways. The first part of the project shows that governments associate significant electoral risk with fiscal consolidation. Governments with small electoral margins of victory time fiscal retrenchment strategically to minimise punishment and are very unlikely to pursue fiscal retrenchment when the next election approaches. Building on these findings, the second part will estimate the effect of consolidation on government popularity and electoral outcomes taking into account the strategic behaviour of governments.
Hübscher, Evelyne and Thomas Sattler. 2017. "Fiscal Consolidation under Electoral Risk." European Journal of Political Research 57(1):151-168
Hübscher, Evelyne, Achim Kemmerling and Thomas Sattler. "Austerity for the Win? The Effect of Fiscal Consolidation on Political Support for the Government." Paper presented at the Annual Conference of the European Political Science Association, Vienna, June 2015. Currently under revision.
The Political Preconditions for Successful Economic Stabilisation
Funded by the Swiss National Science Foundation, Grant No. 100017_165480
One of the most urgent policy questions that has emerged from the Eurocrisis concerns the optimal strategy of governments to restore investor confidence in times of macroeconomic instability. Effective economic stabilisation requires that governments send signals that enhance the confidence of investors in the government’s resolve to address the underlying economic problems. Communication between politicians and investors hence is essential in periods of economic instability, but we do not know how political conditions interfere with policymakers’ signalling intentions. This project will gauge the optimal response to international financial pressure under varying political conditions. It combines two, currently separate, areas of political research, notably the political economy of financial markets and the automated analysis of political texts. This will produce original insights into the interaction between elected governments and investors that would not be possible otherwise.
Sattler, Thomas. "The Political Sources of Government Credibility: Evidence from France since 1979." In Progress.
Peterson, Andrew and Thomas Sattler. "Political Communication and Macroeconomic Stabilization in the Eurozone. " In Progress.
Mercantilism in a Liberal World Order
Funded by the Social Sciences and Humanities Research Council of Canada, Insight Grant No. 435140487 (CAD 143'753; with Mark Manger, University of Toronto and Scott Matthews, University of Newfoundland).
Why do some countries run persistent current account surpluses while others run deficits, often over decades, leading to enduring global financial imbalances? Such persistent imbalances are the root cause of most financial crises and contributed to the ongoing Eurozone crisis. Yet the existing literature is either focused on the consequences rather than causes of imbalances, or attributes them to apolitical and structural variables. In this project, we develop an explanation that characterises the key countries in the world economy based on their foreign economic structure to examine the political roots of foreign imbalances. Countries that continuously export more than they import and save more than they spend (surplus countries) accumulate capital that needs to be reinvested abroad. Countries that import more than they export and consume more than they save (deficit countries) borrow from surplus countries. We argue that political and labor market institutions differ across countries, so that some have consistently higher corporate savings rates and lower household consumption rates than others. We hypothesize that such factors are also partially reflected in individual consumption and savings patters, although mediated by socialization effects.
Manger, Mark and Thomas Sattler. "Mercantilism in a Liberal World Order: The Origins of Persistent Current Account Imbalances." Revised version of a paper presented at the Annual Meeting of the International Political Economy Society, Georgetown University, November 2014. (Version: 9 September 2016).
Jörg Haas and Thomas Sattler. "Why Do Some Societies Support Imbalances? Individual Attitudes, Public Discourse and the Current Account in Australia and Germany." Manuscript (Version: 27 February 2017)
Turnout and Electoral Results in EU referendums
Aggregate data on EU referendums indicate that turnout has a significant impact on the outcome of EU referendums. Micro-studies of referendums, however, tend to ignore non-voters and therefore miss an important part of citizens' choice. This is relevant when individuals' characteristics influence both the decision to turn out and the vote choice of those who decide to vote as it is the case for uncertainty about the consequences of a treaty - or, lack of subjective knowledge. This means that there is an amplified effect of knowledge on voting behaviour, first via turnout and second via vote choice. Extending previous work, this project develops a theoretical model relating uncertainty to both turnout and vote choice. Using a statistical model that jointly estimates turnout, vote choice, and their interaction, we show that in important cases, the estimated effect of uncertainty on referendum outcomes is significantly larger than when only the vote choice is considered.
Elkink, Jos and Thomas Sattler. "When Knowledge Counts Twice: The Role of Turnout for EU Referendum Results." Paper presented at the Annual Conference of the European Political Science Association, Barcelona, June 2013. Currently under revision.