Social Implications of Fiscal Policy Responses During Crises
This paper studies the social implications of fiscal policy responses to crises in Latin America over the last 40 years and in the Eurozone during the aftermath of the global financial crisis. We focus on the behavior of four social indicators: the poverty rate, income inequality, unemployment rate, and domestic conflict. We find a causal link from counteryclical (procyclical) fiscal policy responses to reductions (increases) in all four social indicators. These results call into question recent claims on "expansionary fiscal austerity."
This is a longer version of the paper prepared for the ANU-Brookings Conference on "The G20 Summit at Five," Canberra, Australia, November 14-15, 2013. We would like to thank Colin Bradford, Kemal Dervis, David Gruen, Homi Kharas, and conference participants at the "The G20 Summit at Five" for helpful comments and suggestions. We are also extremely grateful to Julia Ruiz Pozuelo and Collin Rabe for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.