Fiscal rule compliance, poverty and social exclusion in the Eurozone

This paper develops a simple model of the effects of fiscal adjustments on poverty. Our theory suggests that in richer countries the effects of fiscal adjustment are stronger the more complex is the poverty measure. By examining a panel of 16 EU countries in the period 2005–2015, the paper finds tha...

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Bibliographic Details
Published inMetroeconomica Vol. 71; no. 2; pp. 316 - 332
Main Authors Bonasia, Mariangela, Canale, Rosaria Rita, Capasso, Salvatore, D’Uva, Marcella
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.05.2020
Subjects
Adjustment
Compliance
Economic analysis
Europe
Eurozone
inequality
Poverty
Public finance
Social exclusion
Welfare
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Summary:This paper develops a simple model of the effects of fiscal adjustments on poverty. Our theory suggests that in richer countries the effects of fiscal adjustment are stronger the more complex is the poverty measure. By examining a panel of 16 EU countries in the period 2005–2015, the paper finds that structural public balance adjustments may harm the welfare of poorer individuals. The empirical estimation hinges on a comprehensive index of poverty and social exclusion, the AROPE index. The results suggest that rigid fiscal rules require specific alternative policies to sustain the welfare of poorer individuals during downturns.
Bibliography:Funding information
This work was financed by the University of Naples “Parthenope” within the Competitive Research Project: “Institutional and Economic Imbalances in the Eurozone and the European Union”
ISSN:0026-1386
1467-999X
DOI:10.1111/meca.12274