10.17889/E111200
Alesina, Alberto
Giavazzi, Francesco
Favero, Carlo
Replication data for: Effects of Austerity: Expenditure- and Tax-Based Approaches
ICPSR Inter-university Consortium for Political and Social Research
2019
10.1257/jep.33.2.141
10.1257/jep.33.2.141
V0
We review the debate surrounding the macroeconomic effects of deficit reduction policies (austerity). The discussion about \"austerity\" in general has distracted commentators and policymakers from a very important result, namely the enormous difference, on average, between expenditure- and tax-based austerity plans. Spending-based austerity plans are remarkably less costly than tax-based plans. The former have on average a close to zero effect on output and lead to a reduction of the debt/GDP ratio. Tax-based plans have the opposite effect and cause large and long-lasting recessions. These results also apply to the recent episodes of European austerity, which in this respect were not especially different from previous cases.