Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity?
Article
Bardaka, I., Bournakis, I. and Kaplanoglou, G. 2021. Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity? Economic Modelling. 94, pp. 908-922. https://doi.org/10.1016/j.econmod.2020.02.032
Type | Article |
---|---|
Title | Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity? |
Authors | Bardaka, I., Bournakis, I. and Kaplanoglou, G. |
Abstract | Departing from the expansionary austerity literature, this study assesses empirically whether fiscal consolidation propagates changes in the supply side of the economy that can potentially influence total factor productivity (TFP). Using a panel data set of 26 OECD countries over the period 1980–2016 and employing panel vector auto-regressive and panel co-integration techniques, we present evidence of both short-run and long-run negative effects of fiscal consolidation on TFP. The short-run impact is disproportionately more damaging for the TFP of low debt countries, while, contrary to the expansionary austerity thesis, our empirical results would advise against spending-driven fiscal consolidation, since such consolidation undermines capacity, due to the importance of government spending in shaping productive capital. Our results have serious policy implications for the implementation and design of fiscal adjustment programmes. |
Publisher | Elsevier |
Journal | Economic Modelling |
ISSN | 0264-9993 |
Electronic | 1873-6122 |
Publication dates | |
Online | 19 Feb 2020 |
31 Jan 2021 | |
Publication process dates | |
Deposited | 02 Mar 2020 |
Accepted | 16 Feb 2020 |
Output status | Published |
Accepted author manuscript | License |
Copyright Statement | © 2020. This manuscript version is made available under the CC-BY-NC-ND 4.0 license. |
Digital Object Identifier (DOI) | https://doi.org/10.1016/j.econmod.2020.02.032 |
Language | English |
https://repository.mdx.ac.uk/item/88x21
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