 Fiscal consolidations in developing countries with a Latin America focus: The role of inequality, informality and corruptionJoão Tovar Jalles and Carola Pessino Journal of Macroeconomics, 2025, vol. 84, issue C Abstract: Widening income disparities, higher corruption and larger informality in many emerging market and developing economies (EMDE) including Latin America, all with pressing and mounting fiscal problems, have rekindled interest in the empirical analysis of the key factors determining the occurrence of fiscal consolidations. Using discrete choice models, this paper examines the drivers of fiscal consolidation episodes in a sample of 148 EMDE between 1980 and 2019 with a focus on Latin America. Inequality does not seem to drive consolidations in Latin America, while more informality (corruption) increases (decreases) the probability of their occurrence. In turn, when examining the drivers of successful consolidations, larger income inequality (informality) seems to act as a boost (hinderance) for successful consolidations. Results are robust to several sensitivity and robustness tests. Keywords: Fiscal adjustments; Filtering; Panel data; Binary choice models; Local projection; Nonlinearities; Corruption; Shadow economy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:84:y:2025:i:c:s0164070425000126 DOI: 10.1016/j.jmacro.2025.103675 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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