The Effects of Government Spending in the Eurozone

Gabriel, Ricardo Duque; Klein, Mathias; Pessoa, Ana

doi:10.2139/ssrn.3752326

Cited by 5 publications

(17 citation statements)

References 64 publications

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“…T A B L E 3 Pearson correlation between government spending proxies from AMECO and ARDECO. Gabriel et al, 2020;Nakamura & Steinsson, 2014).…”

Section: Empirical Methodologymentioning

confidence: 99%

“…We use population data to calculate the variables in per capita terms. In order to obtain NUTS 3 data for government spending we follow the suggestions of Gabriel et al (2020) and Brueckner et al (2022) and we use the gross value added (GVA) of the non-market sector as a proxy for the final consumption expenditure of the General Government (since the latter is the main actor in the non-market sector in Europe, especially in Italy). The GVA of the non-market sector encompasses compensation of employees, including social contributions, consumptions of fixed capital, that measures the reduction in the value of fixed assets due to obsolescence, normal wear and tear, and other taxes minus subsidies (these taxes refer to net taxes on production and they do not include consumption nor corporate taxes).…”

Section: Datamentioning

confidence: 99%

“…(ii) education; (iii) human health and social work; (iv) arts, entertainment, and recreation; (v) other service activities; and (vi) activities of households and extra-territorial organizations and bodies. As pointed out by Gabriel et al (2020) and Brueckner et al (2022), the GVA of the non-market sector does not include intermediate consumption of the General Government and only the first three sub-sectors (which cover most of the GVA of the non-market sector) are closely linked to the General Government in the national account. Overall, the GVA of the non-market sector accounts for 70% of the General Government consumption expenditure.…”

Section: Datamentioning

confidence: 99%

“…Consequently, to address endogeneity issues, we implement an identification strategy developed by Bartik (1991) that relies on the use of so-called "shift-share instruments" in a panel data regression by interacting a time-invariant variable that varies across cross-sectional units with a time-varying factor which is constant across cross-sectional units. In line with Gabriel et al (2020) (who focus on European government spending data) we construct an instrumental variable for government spending by, first, constructing the time invariant share: 4…”

Section: Identification Strategymentioning

confidence: 99%

“…Thus, the source of endogeneity, that is, the violation of the identifying assumption, could come from the vector containing the shares. However, following Gabriel et al (2020) and also Nakamura and Steinsson (2014), we test for the shares' endogeneity in the following subsection. it shows similar values for local units with shares above and below the median (see Table A1 in the Appendix).…”

Section: Identification Strategymentioning

confidence: 99%

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Government spending and credit market: Evidence from Italian (NUTS 3) provinces

Cipollini

Frangiamore

2023

Papers in Regional Science

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This study examines the effects of government spending shocks on the Italian credit market using NUTS 3 data over the sample period 2011-2018. The empirical methodology is based on a local projection IV and the identification of a public spending shock is achieved by constructing a Bartik instrument. The empirical evidence shows a mild positive effect of 1% increase in government spending relative to GDP on the growth of the volume loans relative to GDP. However, the empirical findings show that government spending does not help to ameliorate neither the "size bias," that is the financial constraints which small firms face relative to larger ones, nor the "home bias" in lending related to the process of bank consolidation in Italy.

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“…T A B L E 3 Pearson correlation between government spending proxies from AMECO and ARDECO. Gabriel et al, 2020;Nakamura & Steinsson, 2014).…”

Section: Empirical Methodologymentioning

confidence: 99%

Section: Datamentioning

confidence: 99%

Section: Datamentioning

confidence: 99%

Section: Identification Strategymentioning

confidence: 99%

Section: Identification Strategymentioning

confidence: 99%

See 3 more Smart Citations

Government spending and credit market: Evidence from Italian (NUTS 3) provinces

Cipollini

Frangiamore

2023

Papers in Regional Science

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NextGenerationEU and the Future of the European Monetary Union: Shifting Interests and New Fractures in the German Power Bloc

Schneider

2023

J of Common Market Studies

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Based on joint borrowing and a significant transfer component, NextGenerationEU stands in contrast to Germany's longstanding rejection of a ‘debt’ and ‘transfer union’. This article probes into the determinants of this shift in Germany's European policy approach. Focusing on the conflicts in Germany over the ‘deepening’ of the Monetary Union through fiscal capacity building between 2015 and 2020, it investigates which actors, interests and strategies instigated this shift. The analysis is based on trade and exchange rate data, a qualitative document analysis of position papers as well as expert interviews with interest group representatives, parliamentarians and civil servants. Theoretically, the study draws on concepts from regulation theory, materialist state theory and neo‐Gramscianism. It argues that even though not a fundamental paradigm shift, Germany's push for NextGenerationEU indicates a strategic re‐orientation of parts of the German power bloc towards European fiscal integration, amplified by recent geopolitical dynamics and crisis tendencies.

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The Political Costs of Austerity

Gabriel,

Klein,

Pessoa

2023

Review of Economics and Statistics

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Using a novel regional database covering over 200 elections in several European countries, this paper provides new empirical evidence on the political consequences of fiscal consolidations. To identify exogenous reductions in regional public spending, we use a Bartik-type instrument that combines regional sensitivities to changes in national government expenditures with narrative national consolidation episodes. Fiscal consolidations lead to a significant increase in extreme parties' vote share, lower voter turnout, and a rise in political fragmentation. We highlight the close relationship between detrimental economic developments and voters' support for extreme parties by showing that austerity induces severe deconomic costs through lowering GDP, employment, private investment, and wages. Austerity-driven recessions amplify the political costs of economic downturns considerably by increasing distrust in the political environment.

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The Effects of Government Spending in the Eurozone

Cited by 5 publications

References 64 publications

Government spending and credit market: Evidence from Italian (NUTS 3) provinces

Government spending and credit market: Evidence from Italian (NUTS 3) provinces

NextGenerationEU and the Future of the European Monetary Union: Shifting Interests and New Fractures in the German Power Bloc

The Political Costs of Austerity

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