Cover IMF Working Papers
Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects
Author: Mr. Alberto Alesina and Mr. Roberto Perotti
Series:
IMF Working Papers
Volume/Issue:
Volume 1996: Issue 070
Language:
English
Publication Date:
01 Jul 1996
DOI:
https://doi.org/10.5089/9781451960433.001
ISBN:
9781451960433
ISSN:
1018-5941
Pages:
52
Keywords:
WP; government wage; substitution effect; union-government negotiations; wage moderation; consumer confidence; exchange rate; government employment; party government; nonwage government consumption; Nonwage govt; Fiscal consolidation; Labor costs; Public sector wages
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper studies how the composition of fiscal adjustments influences their likelihood of “success”, defined as a long lasting deficit reduction, and their macroeconomic consequences. We find that fiscal adjustments which rely primarily on spending cuts on transfers and the government wage bill have a better chance of being successful and are expansionary. On the contrary fiscal adjustments which rely primarily on tax increases and cuts in public investment tend not to last and are contractionary. We discuss alterative explanations for these findings by studying both a full sample of OECD countries and by focusing on three case studies: Denmark, Ireland and Italy.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund