Macroeconomic and distributional effects of fiscal consolidation measures in EU countries

Philipp Heimberger and Anna Matzner

No 270, wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw

Abstract: We provide new evidence on the effects of fiscal consolidation measures on output, unemployment, income inequality and consumer price inflation. To identify causal impacts, we use a narrative-based instrumental variable strategy drawing on historical records of exogenous fiscal changes motivated by deficit reduction, covering 12 EU countries from 1980 to 2020. Our results for the short to medium run show that fiscal consolidations (a) lower real output; (b) raise the unemployment rate; (c) increase income inequality; and d) reduce consumer price inflation. Contractionary macroeconomic effects are stronger during recessions than during non-recession periods.

Keywords: Fiscal consolidation; austerity; growth; unemployment; income inequality; European Union (search for similar items in EconPapers)
JEL-codes: E62 H60 (search for similar items in EconPapers)
Pages: 22 pages including 1 Table and 7 Figures
Date: 2026-02
References: Add references at CitEc
Citations:

Published as wiiw Working Paper

Downloads: (external link)
https://wiiw.ac.at/macroeconomic-and-distributiona ... untries-dlp-7525.pdf (application/pdf)

Related works:
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:wii:wpaper:270

Ordering information: This working paper can be ordered from
https://wiiw.ac.at

Access Statistics for this paper

More papers in wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw Contact information at EDIRC.
Bibliographic data for series maintained by Customer service ().