Effects of Austerity: Expenditure- and Tax-Based Approaches

Alberto Alesina, Carlo Favero and Francesco Giavazzi

Journal of Economic Perspectives, 2019, vol. 33, issue 2, 141-62

Abstract: We review the debate surrounding the macroeconomic effects of deficit reduction policies (austerity). The discussion about "austerity" in general has distracted commentators and policymakers from a very important result, namely the enormous difference, on average, between expenditure- and tax-based austerity plans. Spending-based austerity plans are remarkably less costly than tax-based plans. The former have on average a close to zero effect on output and lead to a reduction of the debt/GDP ratio. Tax-based plans have the opposite effect and cause large and long-lasting recessions. These results also apply to the recent episodes of European austerity, which in this respect were not especially different from previous cases.

JEL-codes: E23 E32 E62 H20 H50 H62 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/jep.33.2.141
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (97)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/jep.33.2.141 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... PTYFkNGAgfQez7RbUlaP (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... Lm5p6yhQDwrKaedXWZee (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... 56DQi32YO4rkQRv_3epl (application/zip)

Related works:
Working Paper: Effects of Austerity: Expenditure- and Tax-based Approaches (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:33:y:2019:i:2:p:141-62

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().