Fiscal rule compliance, poverty and social exclusion in the Eurozone. (27th October 2019)

• Record Type: Journal Article
• Authors: Bonasia, Mariangela; Canale, Rosaria Rita; Capasso, Salvatore; D'Uva, Marcella
• Is Part Of: Metroeconomica. Volume 71:Number 2(2020)
• Page Start: 316
• Page End: 332
• Publication Date: 2019-10-27
• Subjects: Europe -- inequality -- poverty -- Public finance; Economics -- Periodicals; 330
• DOI: 10.1111/meca.12274
• Languages: English
• ISSNs: 0026-1386

Abstract

Abstract: 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.