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The impact of fiscal consolidations on the functional components of government expenditures

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journal contribution
posted on 16.02.2017 by Vitor Castro
This paper analyses how the functional components and sub-components of government expenditures are affected by fiscal consolidations. A fixed-effects estimator is employed over a panel of 15 European Union countries during the period 1990–2012. The results show that spending on public services increases during fiscal consolidations, while spending on defence, public order, health, education and social protection is significantly cut. A more disaggregated analysis proves that fiscal consolidations are harmful for important social expenditures, in particular, for those related to citizens’ safety, health assistance, social protection and investment in human capital. This evidence is even stronger in a particular group of countries, known in the literature as PIIGS. Hence, fiscal consolidations can have important implications on the living standards of the more economically vulnerable citizens.

Funding

The author wishes to thank the financial support provided by the Portuguese Foundation for Science and Technology under the research grant SFRH/BSAB/113588/2015 (partially funded by COMPETE, QREN and FEDER).

History

School

  • Business and Economics

Department

  • Economics

Published in

Economic Modelling

Volume

60

Pages

138 - 150

Citation

CASTRO, V., 2016. The impact of fiscal consolidations on the functional components of government expenditures. Economic Modelling, 60, pp. 138-150.

Publisher

© Elsevier

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Acceptance date

08/09/2016

Publication date

2016

Notes

This paper was accepted for publication in the journal Economic Modelling and the definitive published version is available at http://dx.doi.org/10.1016/j.econmod.2016.09.027

ISSN

0264-9993

Language

en

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