Journal Article

National fiscal consolidations and regional inequality in Europe

Luca Agnello, Giorgio Fazio and Ricardo M. Sousa

in Cambridge Journal of Regions, Economy and Society

Volume 9, issue 1, pages 59-80
Published in print March 2016 | ISSN: 1752-1378
Published online January 2016 | e-ISSN: 1752-1386 | DOI: https://dx.doi.org/10.1093/cjres/rsv033
National fiscal consolidations and regional inequality in Europe

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  • Welfare Economics
  • Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
  • Urban, Rural, and Regional Economics

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Using annual data for 13 European countries over the period 1980–2008, we assess the impact of national fiscal consolidations on the income inequality of European regions. Regional dispersion increases in the outcome of consolidation episodes, particularly, when packages are more severe and implemented through spending cuts rather than tax rises. From a policy perspective, these findings suggest that fiscal consolidations driven by reductions in government spending can exacerbate regional disparities and may ultimately counteract the European policy efforts to promote territorial cohesion. Our results are robust to alternative inequality measures, the occurrence of crisis episodes and the exclusion of fiscal outliers.

Keywords: fiscal consolidations; regional inequality; Europe; D63; E62; E64; R1

Journal Article.  10255 words.  Illustrated.

Subjects: Welfare Economics ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook ; Urban, Rural, and Regional Economics

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