ABOUT THE EVENT
In this study the authors have utilized a novel panel database to document a substantial number of (215) fiscal consolidation episodes that occurred between 1980 and 2018 for 78 countries. Using Local Projections (LP), we examine impulse responses of selected income inequality/distribution indicators to these episodes. Our findings show that fiscal consolidations are accompanied by higher (lower) inequality under: i) above (below)-median capital account openness; ii) above (below)-median debt-to-GDP ratios; and iii) below (above)-median skill levels. We also find that below (above)-average social expenditure/unemployment rates and above-average tax progressivity in the pre-consolidation year are associated with an equalizing (non-equalizing) effect post-consolidation. Finally, fiscal consolidation design features matter, with below-average size/duration and tax-based consolidations reducing inequality (contrary to above-average size/duration and expenditure-based consolidations). These results are generally consistent with the reviewed literature and remain robust to alternative specifications.
The proposed event will help participants gain a better understanding of:
- Trends in and characteristics of fiscal consolidations over the past years.
- The association between fiscal consolidations and various indicators of income inequality/distribution.
- Channels through/conditions under which fiscal consolidations are associated with income inequality/distribution.
Participants will have the opportunity to gain insights from a new study , presenting findings along the aforementioned dimensions, which could be applied to WB/MTI country-specific work on fiscal adjustments.
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