Austerity, fiscal volatility, and economic growth

  • This paper contributes to the ongoing debate on the relationship between austerity measures and economic growth. We propose a general equilibrium model where (i) agents have recursive preferences; (ii) economic growth is endogenously driven by investments in R&D; (iii) the government is committed to a zero-deficit policy and finances public expenditures by means of a combination of labor taxes and R&D taxes. We find that austerity measures that rely on reducing resources available to the R&D sector depress economic growth both in the short- and long-run. High debt EU members are currently implementing austerity measures based on higher taxes and/or lower investments in the R&D sector. This casts some doubts on the real ability of these countries to grow over the next years.

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Metadaten
Author:Giuliano Curatola, Michael DonadelliORCiDGND, Alessandro Gioffré, Patrick GrüningGND
URN:urn:nbn:de:hebis:30:3-344435
URL:http://ssrn.com/abstract=2458855
DOI:https://doi.org/10.2139/ssrn.2458855
Parent Title (German):SAFE working paper series ; No. 56
Series (Serial Number):SAFE working paper series (56)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/07/14
Tag:Austerity Measures; Endogenous Growth; Fiscal Policy; R&D
Page Number:50
HeBIS-PPN:348927924
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht