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

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Author Info

  • Bruno Martorano,

    ()
    (Unicef-IRC)

  • Giovanni Andrea Cornia

    ()
    (Dipartimento Scienze Economiche, Università degli studi di Firenze)

  • Frances Stewart

    (Queen Elizabeth House, University of Oxford)

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.

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Bibliographic Info

Paper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa in its series Working Papers - Economics with number wp2012_23.rdf.

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Length: 33 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:frz:wpaper:wp2012_23.rdf

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Keywords: financial crises; fiscal adjustment; public social expenditure; human development.;

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  1. Easterly, William, 1999. "When is fiscal adjustment an illusion?," Policy Research Working Paper Series 2109, The World Bank.
  2. Eduardo Lora & Mauricio Olivera, 2006. "Public Debt and Social Expenditure: Friends or Foes?," IDB Publications 43578, Inter-American Development Bank.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "From Financial Crash to Debt Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
  4. Frances Stewart, 2012. "The Impact of Global Economic Crises on the Poor: Comparing the 1980s and 2000s," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 13(1), pages 83-105, February.
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