The Distributional Effects of Fiscal Consolidation

ByLaurence M. Ball, Davide Furceri, Daniel Leigh, Prakash Loungani

June 21, 2013

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.

Subject: Fiscal consolidation, Fiscal policy, Income, Income distribution, Income inequality, Labor, National accounts, Personal income, Unemployment

Keywords: budget outcome, contractionary effect, distributional effect, distributional effects, effects of fiscal consolidation, Fiscal consolidation, Global, Income, Income distribution, income inequality, income share, long-term unemployment, price boom, Unemployment, WP

Pages:
24
Volume:
2013
DOI:
https://doi.org/10.5089/9781475551945.001
Issue:
151
Series:
Working Paper No. 2013/151
Stock No:
WPIEA2013151
ISBN:
9781475551945
ISSN:
1018-5941

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