Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity?
Ioannis Bournakis () and
MPRA Paper from University Library of Munich, Germany
Departing from the expansionary austerity literature, this study assesses empirically whether fiscal consolidation propagates changes in the supply side of the economy that can potentially influence total factor productivity (TFP). Using a panel dataset of 26 OECD countries over the period 1980–2016 and employing panel vector autoregressive and panel cointegration techniques, we present evidence of both short-run and long-run negative effects of fiscal consolidation on TFP. The short-run impact is disproportionately more damaging for the TFP of low debt countries, while, contrary to the expansionary austerity thesis, our empirical results would advise against spending-driven fiscal consolidation, since such consolidation undermines capacity, due to the importance of government spending in shaping productive capital. Our results have serious policy implications for the implementation and design of fiscal adjustment programmes.
Keywords: Total factor productivity; Fiscal consolidation; OECD countries; Austerity; Growth (search for similar items in EconPapers)
JEL-codes: C23 E62 H68 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-eff and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/98880/3/MPRA_paper_98880.pdf original version (application/pdf)
Working Paper: Total factor productivity (TFP) and fiscal consolidation: how harmful is austerity? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98880
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().