Fiscal Discipline and Social Capital: Evidence from Europe During the Last Economic Crisis and Recovery

Discussions on Estonian Economic Policy: Theory and Practice of Economic Policy, Vol. 20, No. 2, 2012

24 Pages Posted: 29 Dec 2012

See all articles by Eve Parts

Eve Parts

University of Tartu - Faculty of Economics and Business Administration

Date Written: November 15, 2012

Abstract

The purpose of the current paper is to investigate the possible relationship between fiscal discipline and social capital in EU member states during the last economic crisis and recovery, along with the assessment of the initial welfare effects of fiscal stimulus measures. Preliminary results show that institutional trust and general trust as social capital indicators associate positively with the extent of fiscal stimulus, while governance indicators show negative correlations. However, the significance of these results is relatively low and the subject needs thus further investigation. Further, it appeared that fiscal stimulus had weak positive effect on short-term recovery of GDP and employment, but not on medium-term GDP growth potential.

Keywords: social capital, fiscal deficit, government debt, European countries

JEL Classification: A13, E12, E30, E62, H6, O52

Suggested Citation

Parts, Eve, Fiscal Discipline and Social Capital: Evidence from Europe During the Last Economic Crisis and Recovery (November 15, 2012). Discussions on Estonian Economic Policy: Theory and Practice of Economic Policy, Vol. 20, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2194468

Eve Parts (Contact Author)

University of Tartu - Faculty of Economics and Business Administration ( email )

Narva Rd. 4-A214
Tartu 51009, 51009
Estonia

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