NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Matteo Paradisi

Department of Economics
Harvard University
Littauer 108
Cambridge, MA 02138

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NBER Working Papers and Publications

May 2017The Effects of Fiscal Consolidations: Theory and Evidence
with Alberto Alesina, Omar Barbiero, Carlo Favero, Francesco Giavazzi: w23385
We investigate the macroeconomic effects of fiscal consolidations based upon government spending cuts, transfers cuts and tax hikes. We extend a narrative dataset of fiscal consolidations, finding details on over 3500 measures. Government spending and transfer cuts reduce output by less than tax hikes. Standard New Keynesian models match our results when fiscal shocks are persistent. Wealth effects on aggregate demand mitigates the impact of a persistent spending cut. Static distortions caused by persistent tax hikes cause larger shifts in aggregate supply under sticky prices. This channel explains different sizes of multipliers found in fiscal stimuli compared to consolidation plans.
January 2015Austerity in 2009-2013
with Alberto Alesina, Omar Barbiero, Carlo Favero, Francesco Giavazzi: w20827
The conventional wisdom is (i) that fiscal austerity was the main culprit for the recessions experienced by many countries, especially in Europe, since 2010 and (ii) that this round of fiscal consolidation was much more costly than past ones. The contribution of this paper is a clarification of the first point and, if not a clear rejection, at least it raises doubts on the second. In order to obtain these results we construct a new detailed "narrative" data set which documents the actual size and composition of the fiscal plans implemented by several countries in the period 2009-2013. Out of sample simulations, that project output growth conditional only upon the fiscal plans implemented since 2009 do reasonably well in predicting the total output fluctuations of the countries in our sampl...
October 2014Political Budget Cycles: Evidence from Italian Cities
with Alberto Alesina: w20570
The introduction of a new real estate taxes in Italy in 2011 generated a natural experiment, which is useful to test political budget cycles, i.e. the strategic choice of fiscal variables in relation to elections. We do find substantial evidence of political budget cycles, with municipalities choosing lower tax rates when close to elections. We observe this budget cycle only for smaller municipalities where the tax was more likely to be the single most important issue for the local government. Cities close to elections with large deficits did not set lower rates before elections, probably because they felt the binding constraints of budget rules.

Published: Alberto Alesina & Matteo Paradisi, 2017. "Political budget cycles: Evidence from Italian cities," Economics & Politics, vol 29(2), pages 157-177.

 
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