Human Development and Fiscal Policy: Comparing the Crises of 1982-85 and 2008-11

Bruno Martorano (), Giovanni Cornia and Frances Stewart

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: The paper juxtaposes the fiscal policies – and in particular the changes in social expenditures – adopted during the debt crisis of 1982-1985 and the financial crisis of 2008-2011. The paper shows that – contrary to the early 1980s - the governments’ responses in 2008-2009 were characterized by the adoption of Keynesian fiscal stimulus packages in which an increase in social spending represented one of the main components. Nonetheless, in 2010-11 fear of debt default and continuous pressures coming from the financial markets pushed many policy makers to introduce austerity packages and cut public social expenditure, offsetting in this way part the prior policy decisions, as already observed in the early 1980s. Econometric evidence included in the paper shows that the factors explaining the difference in policy approaches between the early 1980s and 2008-2009 include greater country autonomy compared with the past, the spread of democracy and the greater attention paid to human development by policy-makers designing fiscal adjustments.

Keywords: financial crises; fiscal adjustment; public social expenditure; human development. (search for similar items in EconPapers)
JEL-codes: E62 G01 H5 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2012
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (7)

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