The effects of economic austerity on pro-sociality: Evidence from Greece

Abstract

The European sovereign debt crisis resulted in policies of fiscal austerity and economic downturn in Greece, marked by a prolonged period of recession and high unemployment. This article explores the social impact of the economic crisis, focusing on its effects on altruism using new household-level survey data and quasi-behavioral outcomes. We focus on the effects of joblessness, the most severe form of economic hardship imposed as a result of the crisis. Our findings reveal a strong relationship between job loss in the household and decreased altruism. We provide experimental evidence of these effects and of in-group bias in charitable giving as a result of joblessness. Our results show that joblessness intensifies survey respondents’ preferences for national as opposed to foreign charities.

Keywords

Altruism austerity joblessness solidarity

Introduction

In 2009, Greece’s government announced that its budget deficit was 12.9% of the country’s GDP, four times the 3% limit mandated by the European Union (EU). The announcement marked the beginning of a sharp period of fiscal adjustment during which austerity policies were implemented to reduce the deficit and promote growth. Partly due to these policies and to problems and delays related to their implementation, Greece went into 5 years of recession, GDP dropped by 25% and the official unemployment rate jumped to 27%. The painful adjustment period turned public opinion against Greece’s creditors and delegitimized the political establishment. The public’s reaction to austerity policies and their economic consequences has been extensively analyzed; however, their social impact is less well understood. This article explores the social consequences of the European sovereign debt crisis in Greece with a focus on the effects of economic hardship on group solidarity. Specifically, we ask whether the experience of joblessness in the context of an economic crisis makes individuals more or less altruistic toward others.

Greece’s debt crisis led to a sharp increase in unemployment starting in 2010. We take advantage of this unexpected rise in unemployment to study the social impact of the economic crisis. Using data from a face-to-face survey of a representative sample of Greek households (the 2016 round of the Life in Transition Survey (LiTS) funded by the European Bank for Reconstruction and Development (EBRD) and the World Bank), we provide the first systematic analysis of the effects of economic austerity on altruism in Greece. More broadly, we contribute to the literature on economic determinants of pro-social behavior, of which altruism is an established type. We measure altruism with charitable giving and provide experimental evidence on in-group bias in altruistic behavior as a function of exposure to joblessness.

Our analysis is informed by psychological theories of behavior, including perspectives that connect joblessness to resentment and polarization. The psychological effects of unemployment on individuals are increasingly recognized in the literature. Joblessness has been linked to mental health impairment, and that impairment is even greater for individuals who lose their jobs relative to those who have never had recent work experience (Batic-Mujanovic et al., 2017; Paul and Moser, 2009). This article broadens the scope of these investigations and considers the impact of joblessness on social polarization and altruism in Greece.

We argue that joblessness reduces altruism. Joblessness is experienced as an exceptionally severe hardship in the context of an economic downturn, exposing affected individuals to disproportionate risks relative to the rest of the population. This asymmetric risk exposure weakens the bonds with the rest of the in-group. The opposite pattern is likely to occur in crises that generate shared risks, such as natural disasters (Savala, 2018; Tierney, 2007) or international wars which bring people together by virtue of being exposed to a common threat that reduces the perceived distance separating individuals in a given group. By contrast, joblessness is felt as a “targeted” hardship that separates the affected individuals from the group, increasing their social and economic isolation. Individual-specific risks due to joblessness make class cleavages and other social divisions more cognitively salient for those who have lost their jobs, creating psychological trauma, and increasing the social distance that separates them from the rest of the population.

Although most of the population experienced wage cuts or reductions in disposable income in Greece, a smaller percentage experienced job loss (21% of respondents in our sample) and most of those affected were concentrated in the private sector due to protections from layoffs in the public sector. Our article explores whether the experience of joblessness reduced individuals’ willingness to make donations to philanthropic organizations, an empirical measure of altruism. We use new data from an allocation game that was embedded in a household survey conducted in Greece between November 2015 and January 2016. There is clear evidence that donations are lower among those most affected by the crisis. This reduction in giving to charitable organizations is not entirely explained by the reductions in all forms of spending that one could reasonably expect as a result of a drop in disposable income—a clear consequence of joblessness. The effect that we identify persists across levels of household wealth and is not mediated by income, which supports the hypothesis that it is indicative of diminished altruism due to a psychological mechanism that we posit in this article. Furthermore, we show that reduced charitable giving is correlated with other outcomes suggestive of a decline in altruism and solidarity, such as reduced support for tax spending to help low-income households in need of assistance and welfare chauvinism. The latter effect is measured by the difference in charitable donations to organizations that cater to Greeks and organizations that help mainly foreigners.

Because a default on Greek debt would have had negative repercussions for several economies in western Europe, the debt crisis made differences between Greek and foreign interests cognitively salient, which could have led to the activation of national identities and us-versus-them thinking. A widely shared view among the Greek public was that Greece’s bailout packages were designed to prevent an international financial crisis by turning private debt exposure to Greek debt into public debt carried by European taxpayers, which strengthened domestic opposition to austerity policies. The belief that the crisis was partly caused by foreign institutions reified us-them distinctions and generated resentment among taxpayers in Greece, but also in EU lending countries. That resentment was fanned by the media and by public debates on whether Greece deserved assistance or whether it should be expelled from the Eurozone. We explore whether the unemployment caused by Greece’s debt crisis in this context lowered generalized altruism and whether that decline was more pronounced with respect to the charities that helped foreigners more than they helped Greeks.

Theory and hypotheses

Giving to charity is a type of pro-social behavior, yet there is no canonical model of pro-social behavior that can form the basis of our analysis. Previous studies have explained pro-sociality as motivated either by anticipated reciprocity or altruism; in turn, altruism has been analyzed as a personality characteristic that explains other-regarding preferences akin to a “taste for giving” (Andreoni, 1990; Rushton et al., 1981) and, according to sociobiological theories, altruism could be an evolutionary response to group threat (Bowles, 2009). Evidence of altruistic behavior abounds, ranging from sacrifice in war to charitable giving, and experimental studies have established that the expression of altruism usually benefits an in-group—an ethnic, religious, or national group, or a school, a team, or any other social grouping with which an individual shares one or more attributes.¹ While behavioral theories have explained altruism as a fairly constant feature of individual behavior in the context of inter-group competition, we must also explore contextual or situational factors to explain individual-level over-time variation in altruistic behavior. The economic crisis constitutes such a situational factor that could generate short- or long-term effects on altruism and other types of pro-social behavior.

Crises such as natural disasters, wars, or other situations that generate collective or shared hardships affect population-level altruism differently than crises that generate group-specific or individual-specific hardships. This insight is reflected in the literature on social preferences, generosity, and social policy (Beramendi, 2012; Rueda, 2017; Rehm, 2016), which suggests that crises that generate shared risks strengthen group bonds by linking individuals’ fate. In other contexts, a “linked fate” (Dawson, 1995) can explain how non-targeted (indiscriminate) repression unifies minority groups or others whose rights are restricted by the state, promoting collective action (Cederman et al., 2015; Nugent, 2018). Similarly, natural disasters or shared external security threats can unify domestic groups exposed to those threats by reducing the social distance that divides them and strengthening empathy among in-group members (Gaertner and Dovidio, 2000). By contrast, when threats or risks are not shared equally among in-group members, this can weaken in-group identity by highlighting within-group differences and creating more social distance among in-group members (Nugent, 2018).

These insights are based on the foundational literature in social psychology that explains patterns of group identification. The common thread is that any conflict that makes specific identities (or attributes that characterize different identities) cognitively salient will create social distance between individuals sharing that attribute and the rest of society. Individuals are inclined to identify with groups toward which they feel more socially proximate², and greater distance will reduce the strength of social identification (Gaertner and Dovidio, 2000). We expect perceptions of social distance to grow—and group identification to weaken—during crises that generate individual-specific risks that are distributed unevenly among members of a group (the opposite would be true if risks are group-wide and evenly distributed). Based on this insight and considering that exposure to joblessness was a risk that was not distributed equally among the population, we posit that Greeks who experienced joblessness due to the austerity measures feel weaker bonds with others, which will translate into lower altruism.

Prior literature offers some support for the idea that disproportionate exposure to economic crisis should reduce pro-social forms of behavior. In the United States, individuals with more exposure to the effects of the Great Recession exhibit more selfishness in lab experiments (Fisman et al., 2015), and survey data show similarly negative effects of economic shocks on generalized trust (Alesina and La Ferrara, 2002). In other studies that focus more closely on the psychological underpinnings of the effects of joblessness, we see that displaced workers are less likely to be involved with social organizations, religious or community groups, or interact with friends (Brand and Burgard, 2008). Although exposure to recessions has been shown to increase support for welfare policies, these effects may be due to self-interest (Giuliano and Spilimbergo, 2014; Margalit, 2013). While the literature on redistributive preferences is related to our study, we choose to analyze charitable giving as a more direct measure of altruism that is unlikely to depend on expectations of reciprocity or direct benefit due to redistribution.

A premise of our analysis is that all forms of pro-social behavior depend on a shared social identity. Any exogenous event that weakens group ties by deepening political, economic, or other cleavages should reduce pro-social behavior and altruism. Job loss amidst economic hardship qualifies as an event that can cause polarization, resulting in a loss of “psychosocial assets” that makes individuals more socially withdrawn from society (Brand, 2015). Job loss has been shown to generate social stigma, anxiety, and insecurity (Newman, 2008), and it is associated with a higher incidence of depression and associated conditions (Brand et al., 2008).

Individual-specific hardship generated by joblessness during an economic crisis induces polarization by heightening perceived conflict between professional groups or social classes. This polarizing effect of job loss might actually be less stigmatizing and pronounced during periods of economic crises due to what scholars have called the “social norm effect” according to which increases in aggregate levels of unemployment make individual experiences with unemployment seem less deviant (Clark, 2010). Yet, economic crises often originate in bad policies or structural inefficiencies so that affected groups or individuals could attribute their bad fortune to political parties, elites, or social classes that are not adversely affected, thereby increasing the social distance between them and the rest of society. The Greek debt crisis may be a case in point as it was largely blamed on poor management of the public sector and on corrupt state programs and policies that benefited closed professions, unions, and other patrons of a deeply clientalistic system (Lyrintzis, 2011). Thus, political discord over who caused the crisis, combined with the uneven distribution of the costs of joblessness after the first bailout, should have caused resentment, which could diminish altruism, as we hypothesize.

H1: Exposure to joblessness during the period of austerity policies in Greece reduced altruism.

In-group/out-group effects

Previous studies have established that there is in-group bias in charitable giving patterns: People are usually more altruistic toward in-group charities and feel more social pressure to donate to them (Charnysh et al., 2015; DellaVigna et al., 2012). This pattern reveals that an individual’s degree of attachment to the group is correlated with their charitable giving to that group. Indeed, one influential study finds co-ethnic bias in giving only among people who feel socially proximate to their in-group (Fong and Luttmer, 2009). We draw on these studies to explore whether, amidst an overall decline in the level of altruism due to the economic crisis in Greece, joblessness caused a sharper reduction in donations to out-group charities. This pattern could be due to the perception that international actors contributed to the austerity policies.

Although the large Greek political parties took most of the blame for the crisis, foreigners were also blamed for the harsh terms of the bailouts. These terms and the targets of structural adjustment policies were decided in coordination with representatives of the EU and the International Monetary Fund (IMF), leading many in Greece to blame foreigners for the sharp increase in unemployment, deep wage cuts, and sharp tax increases (Rudig and Karyotis, 2013). The media fanned negative stereotypes of Greeks in several European lending countries (Thompson, 2012),³ which in turn stoked a nationalist response in Greece (Galbraith, 2018). Blaming outsiders for the crisis could have adversely affected charitable giving to foreigners, as national identities were made more salient by this conflict. The perception that Greek governments were no longer sovereign, having relinquished control to external actors represented by the Troika -European Commission (EC), European Central Bank (ECB), and the IMF- should have a similarly negative impact on sentiment toward outsiders (Sambanis, 2015). Walter et al. (2018) show that EU institutions and politicians intervened forcefully to influence the public debate regarding the debt in Greece. The more the public perceived the crisis as externally driven, and the more the austerity policies were portrayed as insensitive to the welfare of Greeks, the greater should be the social distance separating Greeks (who were affected by the crisis) and foreigners, due to the heightened salience of national identity. Thus, we expect individuals who were severely affected—that is, those who lost their jobs—to exhibit welfare chauvinism in their preferences for social giving. This rise in in-group bias may occur within an overall decline in generalized altruism and solidarity which could be reflected in reductions in giving to in-group charities. However, the effect of widening distance between Greeks and foreigners should be reflected in a greater drop in charitable giving to out-group compared to in-group charities.

H2: Austerity exposure reduces altruism toward the out-group (foreigners) more than it reduces altruism toward the in-group (Greeks).

Research design

Our main empirical measure of exposure to the economic crisis is job loss. We study the period of the crisis and not pre-crisis unemployment. The unemployment rate in Greece rose from 7.8% in 2008 to 12.7% in 2010 (1 year after the start of the crisis) to 27.5% in 2013. These increases are staggering, and job losses incurred during this period were clearly perceived as the result of the austerity policies. Although one could focus on different economic outcomes, we view job loss as the most severe form of exposure to economic crisis⁴. In a country caught in the throes of economic crisis with declining social expenditures and increased taxation of wealth, job losses caused extreme hardship, which we argue would alienate those who were affected.

Our analysis treats exposure to joblessness due to the imposition of austerity policies as an exogenous variable. Although this assumption cannot be proven using our data, we cannot construct plausible arguments that unemployment brought about by austerity policies was targeted at individuals who were identified based on their social preferences or selected according to pre-crisis levels of personality attributes that are somehow correlated with their pro-sociality or altruism.

We note that the set of structural reforms that led to sharp increases in unemployment were decided in consultation with Greece’s external creditors on the basis of a Memorandum of Understanding between the government of Greece and the Troika. More than 200 separate actions were taken to restore fiscal health in the initial Memorandum of 2010, and more were added with each additional bailout negotiation (Mitsopoulos and Pelagidis, 2012). The complexity and unusual breadth of policies that were implemented over a 5-year period (Pagoulatos, 2012) make it unlikely that any single social group was targeted based on attributes that might be correlated with individual social preferences. The role of the Troika in recommending specific reforms further strengthens this view, since the Troika did not have private knowledge of how social preferences were distributed in the Greek population, nor did it have a mandate to consider the broader social impact of adjustment policies. The design of the austerity policies supported by Greece’s creditors was informed by economic theory and all adjustment policies were gradually implemented by several different governments, each of which aimed to serve a different electoral constituency. Thus, specific social groups that might have differed systematically with respect to their ex-ante levels of pro-sociality were unlikely to have been targeted by austerity policies when the entire period of adjustment is considered.⁵

Despite these claims in support of the exogeneity assumption, we acknowledge that we cannot exclude the possibility that there exists some covariation of unobserved correlates of individual-level altruism and exposure to austerity policies that resulted in job loss. We address potential for confounding by controlling for individual-level correlates of social preferences, such as education and pre-crisis economic position, using the rich LiTS dataset as our source. In the Online appendix, we show that individual characteristics that are typically associated with higher donations to charity, such as age, gender, education, and the amount of savings at each person’s disposal do not have a significant association with job loss. We control for sectoral employment in our regression analysis, since public sector employees did enjoy protections from joblessness that were not available to private sector employees. Moreover, we test the sensitivity of our results to the possibility of omitted variable bias using a method developed by Oster (2017).⁶ To further test robustness, we estimate the effect of job loss through matching to adjust for differences between background characteristics in our “treated” and “control” groups and to reduce model dependence.

Measuring altruism and in-group bias

We measure altruism using a modified dictator game. The dictator game has been used extensively in behavioral economics to measure altruism compared to self-interest. In the game, a proposer dictates an allocation of resources (an endowment), which the responder must accept. Charitable giving of a windfall gain is a clear example of such a game, and the outcome is considered a measure of pure altruism (Camerer and Fehr, 2003). In our version of this game, survey respondents are given the opportunity to participate in a lottery that will generate an endowment for them. If they win the lottery, they can keep the money or give all or some of it to charity. They are presented with a choice of charities engaged in similar work: one is a domestic organization, serving primarily Greeks, and the other is an international organization, serving primarily refugees or people in foreign countries. The difference between the charities is intended to capture in-group/out-group distinctions created by differences in national origin of the recipients of charitable donations. We use this game to test whether exposure to job loss reduces giving overall and, in particular, with respect to out-group charities. We use two different pairs of organizations to address concerns that results might be specific to a single issue-area or a single organization.

Data

To measure the social impact of the Greek economic crisis, we conducted a household survey in collaboration with the EBRD and the World Bank during the 2016 LiTS. The survey was conducted from November 2015 to January 2016. Data were collected in face-to-face interviews in 1500 households in Greece’s regions (we use weight-adjusted data, with adjustments made for age, gender, urban/rural status, and region; weights were provided by the polling firm). Sampling for the LiTS was carried out as follows. Respondents (aged 18 and older) were randomly drawn using a two-stage sampling method with primary and secondary sampling units. Households were selected at random from 75 primary sampling units (PSUs) across the country. The head of the household or another knowledgeable household member answered the Household Roster and questions about housing and expenses. All other modules were answered by a randomly selected adult from the household with no substitutions possible, using a minimum of three repeat visits if an interview could not be conducted. We consulted with EBRD economists on the design of the survey and added several questions to the module for Greece.

Few Greeks were shielded from the fallout of the economic crisis. Most households report being affected “a fair amount” (38.5%) or “a lot” (53.4%) by the crisis. However, this concentration of responses at the high end of the scale obscures important differences in exposure. For more nuanced measures of the impact of the crisis, we prefer to use objective changes to personal economic circumstances, specifically job loss. The key explanatory variable used in our analysis is household job loss. Wage or pension reductions is another possible measure, yet measurement error is greater with this variable compared to job loss, as income is likely underreported. Other studies of the effects of economic crises have also focused on job loss (e.g. Margalit, 2013).

We collect data on any household exposure to job loss rather than just job loss experienced by the head of household because we assume that if there is more than one working person in the household, then the income losses resulting from any job loss would affect the entire household. The psychological stress associated with job loss experienced by any household member would be shared by other family members, thereby influencing their outlook and attitudes. In the Online appendix, we show results with head of household job loss for our main specification as a robustness test and the results are consistent with those presented in the article. Subjective assessments of the effect of the crisis suggest that job loss is perceived as a consequence of the crisis which affected the household’s welfare: 74% of households with job loss reported that the crisis affected them “a lot,” compared to 48% of households without job loss.

Measuring pro-social behavior and the choice of nonprofit organizations

Our quasi-behavioral estimate of altruism consists of measuring giving to charities. Each respondent was given a description of a pair of charities and asked how they would like to allocate their lottery winnings of €40.⁷ They had the option of keeping the money or giving all or part of it to charity (the structure of this exercise is similar to a modified dictator game with two potential recipients in addition to the respondent). Charities in each recipient set were engaged in similar work and included a domestic organization serving primarily Greeks and an international organization targeting primarily refugees or people in foreign countries.

The nonprofit organizations were selected based on their mandate. Charity pair A included two organizations that provide food assistance/poverty alleviation. Several food assistance programs emerged to address household poverty during the crisis. We selected a program called “Social Grocery Store” (Koinwniko Pantopwleio) as the in-group charity. This was an organization administered by the municipality of Athens that provided food aid to low-income households. We paired it with the Hellenic Red Cross, an international organization with high name recognition, which respondents were told “works to provide food aid to refugees and immigrants in Greece.” Therefore, while both organizations were described as providing food aid, the out-group charity targeted mostly foreigners, whereas the in-group organization benefited mostly Greeks (without explicitly excluding foreigners as potential recipients of their services).

Charity pair B includes organizations with mandates to improve children’s welfare. Specifically, respondents were told that the organizations provide assistance to abused children or children with disabilities and work to improve health outcomes in children. Both organizations have high name recognition in Greece. The domestic (in-group) organization was “The Smile of the Child” (Hamogelo tou Paidiou) and the international (out-group) organization was the Hellenic Association for UNICEF, which is a subsidiary of UNICEF working in Greece. As with the first pair of charities, the in-group organization targets mainly Greeks by virtue of the scope of its activities and area of operation; UNICEF is a global organization and could be engaged in initiatives within Greece, but also internationally. The mandate of both organizations in charity pair A is closely related to the direct effects of unemployment, so effects should be stronger in charity pair A. However, children’s welfare is also plausibly impacted by the crisis.

Our use of real charitable organizations means that the organizations’ reputations for effectiveness within or across pairs cannot be kept constant and the results might not be generalized to other organizations with similar mandates. Moreover, the nonprofit space in Greece is not very dense, so it was not possible to find organizations that are identical in their size and scope. To ensure that respondents were familiar with the selected organizations, we piloted the charity questions in 20 households prior to the actual survey. The out-group organizations in both pairs are larger and have solid international reputations, thus, we see these comparisons as setting a high threshold for registering in-group bias since the in-group organizations are smaller.⁸

The survey includes several other questions that measure attitudes, including the respondents’ willingness to pay for public education (“would you be willing to give part of your income or pay more taxes, if you were sure that the extra money would be used to improve public education”); trust toward family members, neighbors, other Greeks, or foreigners; trust in institutions; and beliefs about who was responsible for the crisis. These survey items provide measures of alternative outcomes, which we discuss in the next section and in the Online appendix. Our main analysis is focused on the quasi-behavioral indicators of altruism obtained via the allocation game described above.

Analysis

We first evaluate the effect of job loss on altruism, represented by the total allocations of the respondent to charity. Second, we examine how crisis-induced job loss affected preferences for in-group relative to out-group charities. Our hypothesis is that crisis-induced job loss will have a negative effect on donations.

Overall altruism

We model donations to charity as a linear function of job loss, a vector of personal and household characteristics, and region fixed effects. We control for the respondents’ age and gender, their level of education and that of their father, and their availability of pre-crisis savings, which speaks to the individuals’ social class before the crisis, as well as their ability to compensate for some of the hardship due to income losses. We also include several household characteristics as controls: home ownership, public sector employment (an indicator variable denoting whether the head of household was employed in the public sector, for which we control given the differential risk of job loss for public sector vs. private sector employees), and number of adults in the household (with more people in the job market, the risk of exposure to job loss is higher, and other economic effects of the crisis will be felt more strongly).

Table 1 shows the estimates from linear regressions on individuals’ decisions to donate to charity. Column 1 estimates the effect of household job loss on donations in the full sample. Columns 2 and 3 report results separately for charity pair A and charity pair B, respectively. We find evidence for H1 in Table 1: individuals whose households experienced job loss during the crisis gave significantly less to charity. Our findings show a reduction in donations of approximately €8.13 in charity pair A and €4.66 in charity pair B, out of a maximum possible donation of €40.

Table 1.

Effect of job loss on donations to charity.

	Dependent variable: Total amount donated
	(1)	(2)	(3)
	Complete sample	Charity pair A	Charity pair B
Household job loss	−6.07*** (1.59)	−8.13*** (2.24)	−4.66** (2.10)

Individual controls	Yes	Yes	Yes

Household controls	Yes	Yes	Yes

Region FE	Yes	Yes	Yes
Observations	1341	687	654
Upper bound on effect of household job loss^a	−5.90	−8.09	−4.46

Note: Standard errors clustered by PSU are in parentheses. Individual and household controls are described in the text. *p < .10, **p < .05, ***p < .01

The upper bound on the effect of job loss is calculated using Oster’s (2017) method for quantifying the effects of potential omitted variable bias.

Despite including individual-level and household-level controls and region fixed effects, there may still be concerns that the unobserved characteristics of the respondents could have influenced both job loss and altruism. To address this issue, we measure the sensitivity of our results using Oster’s (2017) coefficient stability approach. This test is similar to the approach of Altonji et al. (2005) in that it assesses changes in the estimated effect of job loss as we include controls. However, as Oster (2017) clarifies, we must consider how much of the outcome is explained by the control variables in tandem with the changes they induce in the coefficient of job loss. The upper bounds for the effect of job loss (estimated using the standard assumption that the influence of unobserved variables is equal to that of observed variables and that the maximum R-squared is 1.3 times the observed R-squared) are shown in the bottom row of Table 1. These coefficients are very close to those estimated using the controlled regression. For the complete sample, we estimate that selection on un-observables would have to be 10 times stronger than selection on observables for the true effect of job loss to be zero. Therefore, this test increases our confidence that job loss has a negative and statistically significant effect on pro-sociality.

Matching estimates

Perhaps selection on observables is a bigger threat to causal inference than unobserved heterogeneity. We address this concern via robustness tests included in the Online appendix as well as by estimating average treatment effects of joblessness via matching. We generate a matched sample to compare individuals with job loss to a set of control individuals (without job loss) using genetic matching because it directly maximizes covariate balance (Diamond and Sekhon, 2013; Sekhon, 2011). We match one to one within region on a set of pre-treatment covariates: age, gender, urban/rural status, postsecondary education, and father’s education, and check for balance on these variables and other potential predictors of job loss. The resulting matched dataset is balanced on both sets of variables, increasing our confidence that the treatment and control groups are comparable.

Figure 1 shows the post-matching means for each covariate and p-values for the t-tests that compare treatment and control values (we also show that the balance is improved for covariates not included in the matching). For each covariate, the matching improves balance and leaves no significant difference between groups. Assuming that we have adequately accounted for the treatment assignment mechanism, there should be no significant differences in pre-treatment covariates across treatment and control groups. We check the balance for a wide variety of characteristics of parents that may have influenced their offspring’s risk for job loss during a crisis (these variables are preceded by an asterisk in Figure 1). After matching we find no significant difference between treatment and control groups, which increases our confidence that we satisfy the selection on observables assumption.

Figure 1.

P-values for difference between treatment and control observations before and after matching.

In addition to presenting the difference in means between treatment and control in the matched sample (ATT), we employ regression adjustment to account for any bias that may remain after matching. Thus, we estimate the regression-adjusted ATT by including the variables used for matching as covariates in a regression using the matched sample.

Using the matched sample, we estimate the average treatment effect on the treated (ATT), which is the expected difference between treatment and control conditions for the treated individuals. Identifying this effect requires that our treatment and control groups have common support across covariates and that the treatment assignment is explained by observable covariates. Table 2 also reports the regression-adjusted ATT (using the matching variables as covariates) to account for any remaining influence of covariates (Abadie and Imbens, 2006, 2011). The results show a consistently negative effect of job loss on altruism (Table 2). These findings strongly support H1, that is, that the crisis lowered pro-sociality among those most affected by it (see the Online appendix for further discussion of the matching procedure).

Table 2.

Effect of job loss on donations to charity: matching estimates.

	Matched sample				Complete sample
	No job loss	Job loss	ATT	ATT_RA	Linear model coeff.
Amount donated	28.21	22.36	−5.86***(1.48)	−5.92***(1.28)	−6.07***(1.59)

Note: Matched sample is created using genetic matching on age, gender, education, father’s education, and matched exactly within region. Abadie-Imbens standard errors are in parentheses (column 3). *p < .10, **p < .05, ***p < .01. Regression-adjusted ATT is shown in column 4. For comparison, we present the coefficient from the baseline model, presented in Column 1, Table 1, in the far-right column.

Other robustness tests

In the Online appendix, we return to the main regressions from Table 1 and show that results are unlikely to be driven by household wealth. We also control for differences in interview conditions across observations (e.g. did respondents enter the information themselves, or did they require assistance?); we add a control for party vote in 2009; we check if dropping our control for pre-crisis savings affects the outcome; and report results (marginal effects) using a Tobit regression. Overall, our analysis in the Online appendix shows that reduced altruism cannot be explained by a diminished capacity to give due to income loss and that results are robust to these other controls and estimation approaches.

Attitudes toward social spending

Closely related to our measure of altruism are attitudes about social spending in different policy areas. If job loss reduces altruism by inducing welfare chauvinism, we would expect to see lower support for social programs that are likely to benefit others. The survey instrument asks: “Would you be willing to give part of your income or pay more taxes, if you were sure that the extra money was used to…help the needy? / improve public education? / combat climate change?” (1—yes, 0—no). The results of logistic regressions are presented in Table 3.

Table 3.

Effect of job loss on willingness to pay for social spending.

	(1)Tax for needy	(2)Tax for schools	(3)Tax for climate
Household job loss	−0.80***(0.20)	−0.94***(0.21)	−0.72***(0.25)
Individual controls	Yes	Yes	Yes
Household controls	Yes	Yes	Yes
Region FE	Yes	Yes	Yes
Observations	1263	1309	1245

Note: Standard errors clustered by PSU are in parentheses. Individual/household controls: respondents’ age, gender, highest level of education, father’s highest level of education, pre-crisis savings, home ownership, public sector employment (household head), and number of adults in the household. *p < .10, **p < .05, ***p < .01.

As with the behavioral measure of altruism, household job loss is associated with strong reductions in the expressed willingness to pay higher taxes for each issue-area. Our results echo public opposition to those tax hikes, which were implemented as a condition for the bailouts. Joblessness clearly reduces support for social programs intended to fund broader public goods. These negative attitudes toward social spending are registered in the context of an increasingly alienated electorate which distrusts state institutions and the national government (see the Online appendix for results on trust in institutions using matched data). This is consistent with the idea that the austerity crisis generated social isolation. The overall decline in levels of trust in institutions as a result of job loss while controlling for other covariates is consistent with explanations found in prior literature regarding the turn toward political extremism during deep recessions in other countries (e.g. Dal Bó et al., 2018; Dehdari, 2021). We also show that the decline in trust was much more severe in Greece than in other European countries during the period of the crisis (see the Online appendix). The correlations shown in Table 3, seen together with these results on declining trust, provide further suggestive evidence that the negative effects of joblessness on altruism operate through psychological mechanisms and are not simply due to a reduction in disposable income.

Preference for in-group charities

We hypothesized that altruistic behavior would be directed primarily toward charities targeting Greeks and that the negative effects of joblessness on altruism would be more pronounced with respect to altruism toward out-groups. A glance at the overall donation levels in Figure 2 supports our expectation. Donations to in-group charities outpace those to out-group charities at a ratio of more than 2:1 (in the Online appendix, we show the same figure disaggregated by job loss status): Respondents allocated, on average, €19 to the in-group charity and €7 to the out-group charity while keeping the rest for themselves. Our results sorted by charity type suggest that this imbalance with respect to in-group/out-group giving is even larger for charity pair B (children’s welfare), where respondents gave, on average, €22 to the in-group charity compared to €5 for the out-group charity (see the Online appendix).

Figure 2.

Average donations to in-group and out-group charities and to self.

To what extent are these preferences a result of more severe exposure to the economic crisis? We look at this question by modeling donations to the out-group and in-group charities as separate outcome variables. As in previous models, we use household job loss as the indicator of crisis exposure and include individual- and household-level controls as well as region fixed effects. We do not control for household wealth in these regressions as wealth levels in 2015 are posttreatment with respect to the timing of job loss. The results, presented in Table 4, show that out-group altruism is slightly more sensitive to job loss than is in-group altruism. Overall, we find that job loss reduces out-group giving by approximately €3.

Table 4.

Effect of job loss on donation amount to in-group and out-group charity.

	(1)In-group amount	(2)Out-group amount
Household job loss	−2.84*(1.43)	−3.24***(0.90)
Individual controls	Yes	Yes
Household controls	Yes	Yes
Region FE	Yes	Yes
Observations	1341	1341

In the Online appendix, we disaggregate data from the two charities and find that most of this effect comes from charity pair A (charities that focus on food assistance to poor households). As one would expect, including wealth as a control in the disaggregated analysis has a large impact on the difference between in-group and out-group giving for charity pair A (the coefficient for job loss drops significantly for in-group charity donations, but there is no effect on the reduction in giving to the out-group charity); Yet, we still see a significant negative effect of job loss with respect to in-group giving for charity pair B (in fact, the result becomes more statistically significant). If household wealth was the main driver of the reduction in giving to charities, then we should have expected consistent effects of household wealth on giving to in-group/out-group charities sorted by charity type.

The results in Table 4 (Column 2) show a decrease in the level of altruism toward the out-group. While the absolute amount of the decline is only slightly larger for out-group giving than for in-group giving and the difference is not statistically significant, the decline in support for the out-group should be disproportionate to the decline in overall altruism due to the crisis if job loss intensifies in-group favoritism. If, in contrast, exposure to the crisis reduces altruism in general but does not increase in-group bias, then we should see a proportionate reduction in predicted donations to both in-group and out-group charities.

We study this in Table 5, which summarizes predictions generated by the models presented in Table 4, with continuous covariates held at their means and categorical covariates held at their modes. Job loss reduces predicted out-group altruism by €3.24, which is a 42% drop relative to the amount of giving to the out-group charity without job loss; and it reduces in-group altruism by €2.84, which is a much smaller (15%) decline in giving. These approximations are in line with H2, that is, that austerity exposure would increase in-group preference. In Table 6, we report the effects sorted by charity type using the matched data. Estimates of the decline in giving to both in-group and out-group charities are statistically significant, though as we explain the Online appendix, estimates for the in-group charity are less precisely estimated in some specifications. Using the matched data as a robustness check, we find that the decline in giving due to joblessness is robustly significant with respect to the out-group charities (the Online appendix).

Table 5.

Predicted donations to in-group and out-group charities.

	No job loss	Job loss	Drop
In-group	€ 19.30	€ 16.46	€ 2.84(14.7%)
Out-group	€ 7.64	€ 4.40	€ 3.24(42.4%)

Table 6.

Effect of job loss on donations to in-group and out-group charities.

	Matched sample				Complete sample
Outcome	No job loss	Job loss	ATT	ATT(ra)	Linear model coeff.
In-group amount	20.06	17.39	−2.67 + (1.46)	−2.71*(1.22)	−2.84*(1.43)
Out-group amount	8.27	5.08	−3.19**(1.05)	−3.20**(0.85)	−3.24***(0.90)

Note: For matched sample, column 3 gives the Abadie-Imbens standard error (p-value for in-group amount estimate is 0.067 (p-value without the AI adjustment is 0.04). ⁺p < 0.10, *p < .05, **p < .01, ***p < .001.

In the Online appendix, we disaggregate the analysis by charity pair and control for overall selfishness—that is, how much of the lottery winnings respondents keep for themselves. The analysis reveals that exposure to the economic crisis lowers altruism toward the out-group more than it does toward the in-group, both in absolute and relative terms. We find that increased in-group bias is seen primarily with reference to charity pair A (organizations focused on poverty alleviation). The Online appendix provides additional discussion and results on patterns of giving in the two different charity pairs. We view the weaker results in charity group B as suggestive of floor effects (due to an already strong in-group bias with respect to organizations helping children); it is also likely that attitudes toward children’s rights organizations were not affected as much by the economic crisis.

In charity group A, we compare responses to a domestic organization providing food assistance to poor Greek families and an international organization working in Greece to provide similar types of assistance to refugee families. It is possible that the effects we identify are shaped by the coincidence of the austerity crisis and the unprecedented so-called migration crisis that started in Greece in 2015. During that period, the Aegean islands (Greece) were faced with overwhelming burdens in accommodating extraordinarily large waves of refugees, so it is possible that worsening anti-immigrant attitudes could drive the decline in giving to the out-group charity.

Although we do not have enough data to explore the connection between the so-called migration and the economic crisis, such a reaction would be consistent with prior literature, which shows an association between economic hardship and anti-immigrant sentiment (e.g. Heizmann and Huth, 2021). Nonetheless, exposure to joblessness should be orthogonal to exposure to the so-called migration crisis, and our data suggest that anti-immigrant attitudes are not what explains our results. Specifically, a survey item measuring attitudes toward immigrants that was placed prior to the survey experiments does not show a statistically significant correlation between hostile attitudes (“immigrants are a burden”) and reduction in out-group giving (see the Online appendix). Moreover, while several years after the Greek so-called migration crisis of 2015 the world might have formed negative views of natives’ reactions to the refugees in the Aegean islands, the inhabitants of the Aegean islands were overwhelmingly positive toward refugees, and there was an unprecedented mobilization to assist them in the early phases of the crisis (coinciding with the timing of our survey). Thus, we cannot simply assume that the reduction in out-group giving due to joblessness in poverty alleviation organizations is driven by an overall worsening of attitudes toward foreigners due to economic hardship and we view our results as consistent with evidence from other countries that austerity policies reduce community cohesion (Bray et al., 2022).

Conclusion

Austerity policies were blamed for Greece’s prolonged recession after the economic crisis of 2009. The recession resulted in extraordinarily high levels of unemployment, which compounded other financial consequences of the crisis. Using new data from a nationally representative household survey, we provide the first systematic analysis of the social consequences of the Greek crisis, focusing on the negative effects of joblessness on altruism. Our analyses show that affected individuals across all levels of income exhibit lower altruism as a result of job loss during the crisis and that this decline in altruism is more pronounced with reference to national out-groups.

Our results speak to the broader literature on the economic determinants of social preferences by showing that negative economic shocks with uneven distributive consequences are likely to weaken levels of social trust, reducing pro-social behavior. While it is expected that reductions in income and household wealth will have similar effects, the income channel is not the only path to reduced social cohesion. Experiencing job loss and other negative consequences of an economic downturn affects individuals’ attitudes toward others, and it can affect their mental health and shape their outlook on life in ways that go beyond the material consequences of reduced disposable income. Across income levels, exposure to economic hardship reduces donations to charities. We find that joblessness induces in-group bias when individuals are forced to make a choice between a charity that caters to the national in-group and a charity that helps foreigners. The fact that support for national out-groups declines more than support for national in-groups is consistent with connections made in the extant literature between deep recessions and increased support for nationalist parties. In our data, perceptions that foreigners are to blame for the crisis cannot fully explain the in-group bias in charitable giving. Furthermore, this decline in altruism occurs within a broader decline in solidarity as measured by levels of trust toward others and toward state institutions, and by preferences for less tax spending on the low-income households and on public goods (schooling or the environment).

Our results are broadly consistent with intertwined psychological mechanisms: on the one hand, joblessness increases social isolation and resentment, decreasing general altruism; on the other hand, perceptions that foreigners were partly to blame for the crisis make national identity more salient, thereby increasing in-group bias by deepening perceived social distance between Greek nationals and the targets of international charities (foreigners). Experiencing joblessness amidst harsh economic conditions has an overall negative effect on altruism. This is consistent with psychological theories according to which unequal exposure to threats induces polarization. The fact that joblessness was not experienced equally by all households implies that class and sectoral divisions were made more salient for the affected households, and the unequal exposure generated resentment in households that suffered disproportionately more than others.

As with every single-country study, context-specific factors could shape the results in ways that make them less applicable to other countries. The unprecedented depth of the austerity crisis in Greece, coupled with the so-called migration crisis of 2015 may have set the stage for outsize effects of joblessness on different types of pro-social behavior. In this context, our analysis suggests a possible feedback loop that could shed some light on the depth of economic recessions. To the extent that trust in institutions, willingness to pay taxes and contribute to public goods, and altruism are ingredients for a well-functioning economy, our findings suggest that austerity policies, which result in joblessness, can weaken the social underpinnings of pro-growth policies by increasing citizens’ social isolation and diminishing their incentives to contribute to public goods. Lower levels of altruism will contribute to further economic decline through the sociopsychological pathway as we have discussed. Similarly, our article suggests that if the management of the economic crisis by the government or the media heightens the awareness of us-versus-them distinctions that fall along national lines, this can reduce international cooperation by increasing in-group bias and parochialism.

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Footnotes

Acknowledgments

For useful comments on earlier drafts, we thank Jeremy Celse, Travers Barclay Child, Danny Choi, Elodie Douarin, Ioannis Galariotis, Dorothy Kronick, Guadalupe Tuñón, Brendan O’Leary, and participants at the 2018 workshop on “Corporate Behavior and Institutional Constraints – Multidisciplinary Perspectives on Institutional Dysfunctions and Firm Behavior” for useful comments. We also thank the editor and reviewers of European Union Politics for their help in improving our article during the review process. The views expressed are those of the authors and not of any organization.

Author's note

Elena Nikolova is also at: Global Labor Organization and ILO-Regensburg.

Funding

The authors gratefully acknowledge funding from Yale University's MacMillan Center and the University of Pennsylvania's School of Arts and Sciences.

ORCID iD

Nicholas Sambanis

Supplemental material

Supplemental material for this article is available online.

Notes

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