The structure of business preferences and Eurozone crisis policies

Abstract

What explains business views regarding policy preferences in the Eurozone crisis? Although recent literature examines the impact of the crisis on citizen views, few studies examine business preferences towards adjustment policies. We present unique data from a new representative survey of 500 high-level firm representatives from Spain to test theories about such preferences, in particular views about the euro, fiscal austerity, and wage devaluation, as well as plausible mechanisms for such preferences. We test three broad families of theories to explain such preferences, focusing on the role of structural firm characteristics, economic hardship, and political leanings of firm managers. We find that first, there is a strong conservative position regarding all of these policies. Second, we find that contra conventional approaches to explaining preferences, for the domestic policies (but not for euro views), the political leanings of firms matter much more than baseline structural characteristics. Third, we find that surprisingly economic hardship does not cause firms to demand more left-wing policies, as it might for voters; in fact, firms that have suffered are likely to be more skeptical of such measures. These findings indicate the need to better measure political orientations of firm respondents and suggest that this is a larger division among firms than previously recognized.