The Distributional Effects of Fiscal Consolidation

25 Pages Posted: 11 Jul 2013

See all articles by Laurence Ball

Laurence Ball

Johns Hopkins University - Department of Economics; National Bureau of Economic Research (NBER); International Monetary Fund (IMF)

Davide Furceri

International Monetary Fund (IMF)

Daniel Leigh

International Monetary Fund (IMF)

Prakash Loungani

International Monetary Fund (IMF)

Date Written: June 2013

Abstract

This paper examines the distributional effects of fiscal consolidation. Using episodes of fiscal consolidation for a sample of 17 OECD countries over the period 1978–2009, we find that fiscal consolidation has typically had significant distributional effects by raising inequality, decreasing wage income shares and increasing long-term unemployment. The evidence also suggests that spending-based adjustments have had, on average, larger distributional effects than tax-based adjustments.

Keywords: Fiscal consolidation, OECD, Developed countries, Income distribution, Cross country analysis, fiscal consolidation, distributional effects, income inequality, fiscal consolidation episodes, fiscal consolidations, fiscal adjustments, public debt, fiscal policy, fiscal adjustment, fiscal measures, tax revenue, spending cuts, fiscal actions, fiscal balances, fiscal positions, fiscal variables, fiscal plans, fiscal tightening, government spending, tax revenues, taxation, tax policy, budget deficit, public expenditures, fiscal expansions, fiscal stimulus, tax rates

JEL Classification: E62, E64, D63

Suggested Citation

Ball, Laurence M. and Furceri, Davide and Leigh, Daniel and Loungani, Prakash, The Distributional Effects of Fiscal Consolidation (June 2013). IMF Working Paper No. 13/151. Available at SSRN: https://ssrn.com/abstract=2292338

Laurence M. Ball (Contact Author)

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
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National Bureau of Economic Research (NBER)

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International Monetary Fund (IMF) ( email )

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Davide Furceri

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Daniel Leigh

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Prakash Loungani

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7043 (Phone)
202-623-4740 (Fax)

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