Fiscal adjustments and the short-term trade-off between economic growth and equality Carlos Mulas-Granados
By: Mulas Granados, Carlos
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Material type: 
ArticlePublisher: 2005Subject(s): AJUSTES FISCALES | DESARROLLO ECONOMICO | IGUALDAD | DESIGUALDAD | TECNICAS PRESUPUESTARIASOnline resources: Click here to access online
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Hacienda pública española n. 172, (1/2005), p. 61-92Summary: This article examines the short-term economic impact of alternative fiscal adjustment strategies, with special focus on their effect on economic growth and income distribution. Based on a sample of 53 adjustment episodes occurred in the fifteen EU Member States between 1960 - 2000, this article shows thatdifferent strategies of fiscal adjustment bring about different economic consequences. Expenditure - based adjustments that are preceded by bad economic and fiscal initial conditions, that are accompanied by a devaluation, and that succeedin cutting the least productive expenditures of the budget, are likely to have anti - Keynesian effects, and to be expansionary. Nevertheless, they do so at the expense of increasing income inequality. The opposite is true for revenue - based consolidation. The nineties epitomize the story of expansionary fiscal consolidations via strong wealth and credibility effects but also the birth of the trade - off between growth and equality, mediated by fiscal policy.
| Item type | Current location | Home library | Call number | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
| IEF | HPE/2005/172-3 (Browse shelf) | Available | HPE/2005/172-3 |
This article examines the short-term economic impact of alternative fiscal adjustment strategies, with special focus on their effect on economic growth and income distribution. Based on a sample of 53 adjustment episodes occurred in the fifteen EU Member States between 1960 - 2000, this article shows thatdifferent strategies of fiscal adjustment bring about different economic consequences. Expenditure - based adjustments that are preceded by bad economic and fiscal initial conditions, that are accompanied by a devaluation, and that succeedin cutting the least productive expenditures of the budget, are likely to have anti - Keynesian effects, and to be expansionary. Nevertheless, they do so at the expense of increasing income inequality. The opposite is true for revenue - based consolidation. The nineties epitomize the story of expansionary fiscal consolidations via strong wealth and credibility effects but also the birth of the trade - off between growth and equality, mediated by fiscal policy.
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