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The design of fiscal adjustments

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  • Alberto F. Alesina
  • Silvia Ardagna

Abstract

This paper offers three results. First, in line with the previous literature, we confirm that fiscal adjustments based mostly on the spending side are less likely to be reversed. Second, spending based fiscal adjustments have caused smaller recessions than tax based fiscal adjustments. Finally, certain combinations of policies have made it possible for spending based fiscal adjustments to be associated with growth in the economy even on impact rather than with a recession. Thus, expansionary fiscal adjustments are possible.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18423.

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Date of creation: Sep 2012
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Publication status: published as Alberto Alesina, Silvia Ardagna. "The Design of Fiscal Adjustments," in Jeffrey R. Brown, editor, "Tax Policy and the Economy, Volume 27" University of Chicago Press (2013)
Handle: RePEc:nbr:nberwo:18423

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  1. Kevin A. Hassett & Andrew G. Biggs & Matthew H. Jensen, 2010. "A Guide for Deficit Reduction in the United States Based on Historical Consolidations That Worked," Working Papers 26118, American Enterprise Institute.
  2. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Monetary or fiscal stimulus can help only if unemployment is cyclical; otherwise, if unemployment is structural expansionary policies will lead only to inflation. Careful recent analyses indicate that unemployment is mainly cyclical in the US
    by Blog Admin in British Politics and Policy at LSE on 2012-10-24 16:00:33
  2. Given the enormity of the short- and long-run fiscal challenges facing the US, the lack of policy detail from both presidential candidates is disappointing
    by Blog Admin in British Politics and Policy at LSE on 2012-10-25 13:00:36
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Cited by:
  1. T. Buyse & F. Heylen, 2012. "Leaving the empirical (battle)ground: Output and welfare effects of fiscal consolidation in general equilibrium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/826, Ghent University, Faculty of Economics and Business Administration.
  2. Agnes Benassy-Quere & Guillaume Roussellet, 2012. "Fiscal Sustainability in the Presence of Systemic Banks: The Case of EU Countries," CESifo Working Paper Series 3975, CESifo Group Munich.
  3. Heylen, Freddy & Hoebeeck, Annelies & Buyse, Tim, 2013. "Government efficiency, institutions, and the effects of fiscal consolidation on public debt," European Journal of Political Economy, Elsevier, vol. 31(C), pages 40-59.
  4. Roland Döhrn & György Barabas & Heinz Gebhardt & Tobias Kitlinksi & Martin Micheli & Simeon Vosen & Lina Zwick, 2013. "Die wirtschaftliche Entwicklung im Inland: Binnennachfrage trägt Aufschwung," RWI Konjunkturbericht, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 64, 09.
  5. Borys, Paweł & Ciżkowicz, Piotr & Rzońca, Andrzej, 2013. "Panel data evidence on effects of fiscal impulses in the EU New Member States," MPRA Paper 48243, University Library of Munich, Germany.
  6. Niamh Hardiman, 2013. "Rethinking the political economy of fiscal consolidation in two recessions in Ireland," Working Papers 201316, Geary Institute, University College Dublin.
  7. Philip R. Lane, 2013. "Growth And Adjustment Challenges For The Euro Area," The Economic and Social Review, Economic and Social Studies, vol. 44(2), pages 273-295.
  8. Riccardo Fiorentini & Guido Montani, 2013. "Beyond Austerity A European Recovery Policy Is Feasible," Working Papers 06/2013, University of Verona, Department of Economics.
  9. Stegarescu, Dan, 2013. "Does expenditure composition influence the debt level? Evidence from German federal states," Discussion Papers 52/2013, Deutsche Bundesbank, Research Centre.
  10. Ludger Schuknecht, 2013. "Has Public Insurance Gone Too Far?," CESifo Working Paper Series 4217, CESifo Group Munich.

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