Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects

Alberto Alesina and Roberto Perotti

No 1996/070, IMF Working Papers from International Monetary Fund

Abstract: This paper studies how the composition of fiscal adjustments influences their likelihood of “success”, defined as a long lasting deficit reduction, and their macroeconomic consequences. We find that fiscal adjustments which rely primarily on spending cuts on transfers and the government wage bill have a better chance of being successful and are expansionary. On the contrary fiscal adjustments which rely primarily on tax increases and cuts in public investment tend not to last and are contractionary. We discuss alterative explanations for these findings by studying both a full sample of OECD countries and by focusing on three case studies: Denmark, Ireland and Italy.

Keywords: WP; government wage; substitution effect; union-government negotiations; wage moderation; consumer confidence; exchange rate; government employment; party government; nonwage government consumption; Nonwage govt; Fiscal consolidation; Labor costs; Public sector wages (search for similar items in EconPapers)
Pages: 52
Date: 1996-07-01
References: Add references at CitEc
Citations: View citations in EconPapers (143)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=2037 (application/pdf)

Related works:
Journal Article: Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects (1997)
Working Paper: Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects (1996)
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:imf:imfwpa:1996/070

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().