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How does fiscal austerity impact on poverty and inequality? The Spanish case

Author

Listed:
  • P. Campoy-Muñoz

    (Universidad Loyola Andalucía)

  • M. A. Cardenete

    (Universidad Loyola Andalucía
    Universidad Autonoma de Chile)

  • F. J. De Miguel-Vélez

    (Universidad de Extremadura)

  • J. Pérez-Mayo

    (Universidad de Extremadura)

Abstract

The aim of this paper is contributing to fill the gap between the macroeconomic effects of policy reforms and the microeconomic and social ones, considering simultaneously both kind of impacts. Regarding fiscal adjustments, concern about the sustainability of public deficit and debt resulting from the Great Recession led governments to adopt austerity measures in most European countries. Our analysis considers the redistributive effects of such adjustments for the Spanish economy by simulating a hypothetical reduction of public deficit and distinguishing between spending cuts and tax hikes. In terms of analytical approach, a Computable General Equilibrium (CGE) model and a microsimulation model are integrated to include the general equilibrium effects of these measures as well as the effects on income distribution. The results contribute to the growing but limited literature on the distributional effects of fiscal consolidations by showing that policymakers have to choose between more inequality or more poverty.

Suggested Citation

  • P. Campoy-Muñoz & M. A. Cardenete & F. J. De Miguel-Vélez & J. Pérez-Mayo, 2022. "How does fiscal austerity impact on poverty and inequality? The Spanish case," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 715-737, October.
    • Handle: RePEc:spr:epolit:v:39:y:2022:i:3:d:10.1007_s40888-021-00253-5
    DOI: 10.1007/s40888-021-00253-5
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    More about this item

    Keywords

    Computable general equilibrium model; Inequality; Microsimulation; Poverty; Spain;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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