Saturday, June 22, 2013

The Distributional Effects of Fiscal Consolidation

by Laurence Ball, Davide Furceri, Daniel Leigh and Prakash Loungani

International Monetary Fund

Working Paper No. 13/151
June 21, 2013

This paper examines the distributional effects of fiscal consolidation. Using episodes of fiscal consolidation for a sample of 17 OECD countries over the period 1978–2009, we find that fiscal consolidation has typically had significant distributional effects by raising inequality, decreasing wage income shares and increasing long-term unemployment. The evidence also suggests that spending-based adjustments have had, on average, larger distributional effects than tax-based adjustments.

Read the Paper

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