The Distributional Effects of Fiscal Consolidation

Author/Editor: Laurence M. Ball ; Davide Furceri ; Daniel Leigh ; Prakash Loungani
Publication Date: June 21, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: 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.
Series: Working Paper No. 13/151
Subject(s): Fiscal consolidation | OECD | Developed countries | Income distribution | Cross country analysis

Publication Date: June 21, 2013
ISBN/ISSN: 9781475551945/1018-5941 Format: Paper
Stock No: WPIEA2013151 Pages: 24
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