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Austerity and distributional policy

Matteo Alpino, Zareh Asatryan, Sebastian Blesse and Nils Wehrhöfer

Journal of Monetary Economics, 2022, vol. 131, issue C, 112-127

Abstract: How does fiscal austerity affect redistributive policies? We document that during austerity episodes, countries tend to increase marginal income tax rates on top earners, but not on average earners. We then show that, in response to an exogenously imposed fiscal rule, Italian municipalities increase local non-linear income taxes progressively. They do not adjust other fiscal policies. College-educated mayors are more likely than less educated mayors to implement progressive reforms, and they perform better in the upcoming election. Survey evidence suggests that the differential policy response can be explained by college-educated mayors being more informed about the available policy options.

JEL-codes: D78 H24 H70 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Austerity and Distributional Policy (2020) Downloads
Working Paper: Austerity and distributional policy (2020) Downloads
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DOI: 10.1016/j.jmoneco.2022.07.006

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