Distributional Effects of Fiscal Consolidation

Jensen, Svend E. Hougaard; Rutherford, Thomas F.

doi:10.1111/1467-9442.00297

Cited by 22 publications

(17 citation statements)

References 16 publications

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“…Age can be expected to be of significant importance – young persons may opt for a stronger consolidation such that they do not inherit high debt levels, older persons have been seen as the obstacle to fiscal reform because they will not reap any gains (Jensen and Rutherford, ). Against this conjecture, age exerts no statistically significant influence (neither age individually nor age jointly with age squared)…”

Section: Estimation Resultsmentioning

confidence: 99%

“…This specification was chosen on the basis of prior tests which revealed that the impact of household income amounts to a comparison of low versus higher income. any gains (Jensen and Rutherford, 2002). Against this conjecture, age exerts no statistically significant influence (neither age individually nor age jointly with age squared).…”

Section: Self-interest Affects Preferences For Consolidationmentioning

confidence: 89%

“…The potential importance of fairness considerations also follows from the literature emphasizing that intragenerational considerations -or how the burden of consolidation should be distributed among the current generation -could be crucial for explaining why consolidations are delayed (e.g. Alesina and Perotti (1994) or Jensen and Rutherford (2002)). 1 The importance of the credibility of fiscal policy has long been established in macroeconomics and many macroeconomic models assume that government announcements regarding fiscal plans are credible (e.g.…”

Section: Introductionmentioning

confidence: 99%

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Does the Broad Public Want to Consolidate Public Debt? – The Role of Fairness and of Policy Credibility

Stix

2013

Kyklos

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Summary This paper employs information obtained from a public opinion survey to analyze why voters differ in their demand for fiscal consolidation, i.e. why some voters support and others oppose a reduction of public debt levels. Results demonstrate that preferences for consolidation vary considerably across individuals along economically informed dimensions. First, voters behave rationally in the sense that self‐interest matters. Second, voters care for their children (but this motive seems less important than one might presume). Third, voters care strongly for how the consolidation burden is distributed among the current generation – this is at least as important as the intergenerational aspect. Forth, the lack of credibility of fiscal policy plans is a serious impediment to voters' support for consolidation. These results imply that fiscal consolidation plans should be “fair” and that the imposition of credible fiscal policy rules could increase voters' support of consolidations.

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Section: Estimation Resultsmentioning

confidence: 99%

Section: Self-interest Affects Preferences For Consolidationmentioning

confidence: 89%

Section: Introductionmentioning

confidence: 99%

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Does the Broad Public Want to Consolidate Public Debt? – The Role of Fairness and of Policy Credibility

Stix

2013

Kyklos

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“…82 These findings may reflect the 76. See for example Roine et al (2009), Cardoso (1992, Morley (1995), Lopez (2003), or Jensen and Rutherford (2002).…”

mentioning

confidence: 99%

The Sharing of Macroeconomic Risk

Ahrend

Arnold

Moeser

2011

OECD Economics Department Working Papers

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JT03304774This paper addresses the often neglected question of how macroeconomic risk is shared across and within economies, and identifies reforms that could contribute towards achieving more desirable risksharing outcomes. For risk-sharing across countries, the paper discusses possibilities for international insurance as well as shock-spreading and risk-mitigating policies. Within countries, it assesses the possibilities for individuals to protect their wealth, labour and capital income against various forms of macroeconomic risk and discusses the desirable boundaries between private and government-sponsored risk-sharing institutions. The paper then presents new empirical and model-based evidence about how the short-term impact of selected macroeconomic shocks (including financial crises) is shared across different groups of agents, and analyses how such distributional effects are shaped by differences in institutions. For example, individuals on low incomes, and especially young people, seem in general to lose most from adverse macroeconomic shocks. Also, it appears that across countries two broad types of institutions can be identified that facilitate risk sharing between high and low income earners, namely "social protection" and "reallocation-facilitating" institutions. Based on countries' reliance on these types of institutions, four broad "models" of risk sharing are identified across the OECD and the BRIICS.JEL Codes: D31; D63; E60; F55; G22; H11; I38

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“…As a regular macro model, households, …rms and traders optimise (Samuelson 1947, Sargent 1987) and choose optimal levels of labour supply, employment, consumption, production and trade. Intertemporal optimisation results in the optimal growth rate of output, capital and investment as in Holland and Scott (1998) or Jensen and Rutherford (2002). How can a set of policies be more e¢ cient in terms of welfare to one households rather than to another is evaluated with a social welfare function.…”

Section: Features Of Dynamic Tax Model Of Ukmentioning

confidence: 99%

Fiscal Policy, Growth and Income Distribution in the UK

Bhattarai¹,

Haughton²,

Tuerck³

2015

AEF

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The UK economy growing annually at 2.05 percent and leading the world between 1750 and 1850 experienced a sharp rise in income inequality at the high point of the industrial revolution. A series of tax and transfer enactments from the parliament to protect workers and low income households started towards the end of the nineteenth century reversed this trend making Britain one of the most egalitarian economy in the world by 1960s. New wave of reforms in tax-transfer system and the markets in the last forty years aimed at higher economic growth have raised inequality again both in the original and the post tax income causing widespread concerns. Solutions of the multi-household, multi-sectoral dynamic general equilibrium model show that …scal policy measures impact on growth paths, capital accumulation and investment processes across sectors and in the distribution of income among households. Greater equality does not automatically guarantee greater welfare when the economy is not growing. By taking account of the intertemporal income and substitution e¤ects this model can provide more accurate analysis of impacts of …scal policy measures on the labour-leisure and consumption decisions of households and input choices of …rms. Such analysis is helpful in setting a long-term optimal policy measures based on structural realities to maintain a balance between growth and equity in the 21st century.

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Distributional Effects of Fiscal Consolidation

Cited by 22 publications

References 16 publications

Does the Broad Public Want to Consolidate Public Debt? – The Role of Fairness and of Policy Credibility

Does the Broad Public Want to Consolidate Public Debt? – The Role of Fairness and of Policy Credibility

The Sharing of Macroeconomic Risk

Fiscal Policy, Growth and Income Distribution in the UK

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