Tales of fiscal adjustment

Are fiscal adjustments less successful in decentralized governments?

“…The results correspond to the results obtained by Alesina and Perotti (1997) and Alesina and Ardagna (1998).…”

“…In fact, Sutherland (1997) and Zaghini (2001) provide evidence that sizeable adjustment policies are changing expectations on future tax liabilities and consequently boost aggregate demand immediately, especially in periods of fiscal stress, where a consolidation of the unsustainable path of fiscal policy is to be expected sooner or later. 4 In an extension to the literature Alesina and Perotti (1997) and Alesina and Ardagna (1998) provide an explanation for a successful fiscal stabilization due to labor market effects affecting the cost of firms (the labor market view or composition view). They show that expansionary fiscal consolidation is more likely and sustainable if relying primarily on spending cuts.…”

The Impact of Taxes on the Consumption to Income Ratio

“…Two authors, Alesina and Ardagna, some time ago found a positive effect of expenditure-based fiscal consolidation on aggregate demand (Alesina and Ardagna 1998). Their analysis was leaning on the Ricardian equivalence, the idea that a reduction of government expenditures leads people to expect tax cuts in the future.…”

Partisan Preferences and Political Institutions: Explaining Fiscal Retrenchment in the European Union

“…Roubini and Sachs 1989a, b;De Haan and Sturm 1997;Sakamoto 2001), much less attention has been paid to the factors that influence the decision to reduce a fiscal deficit. Most studies rather deal with the economic consequences of fiscal adjustments (Alesina and Ardagna 1998;Alesina et.al. 2002) or their compositions (Ardagna 2004;MulasGranados 2003).…”