abstract: 'Distributional consequences of fiscal austerity, while being

  increasingly recognized in the policy debate, have received little

  attention in the existing formal work. This paper proposes a

  medium-scale New Keynesian dynamic stochastic general equilibrium model

  incorporating an appropriate dimension of household heterogeneity and a

  well-specified fiscal structure, allowing for a comprehensive analysis

  of losers and winners from austerity. We find, first, that cutting

  transfers and public employment, and raising labour income taxes are the

  most regressive forms of austerity, greatly raising income inequality.

  In contrast, raising capital income taxes is progressive-the only such

  policy in our analysis-and entails the smallest output losses in the

  short term. Second, the speed of austerity emerges as a potential tool

  in fiscal adjustment. Indeed, speedy austerity yields the worst

  distributive and output effects irrespective of its composition.

  Finally, fiscal consolidation is particularly damaging in downturns

  where distributional effects are substantially more unfavourable than in

  normal times.'
affiliation: 'McManus, R (Corresponding Author), Canterbury Christ Church Univ, North
  Holmes Rd, Canterbury, Kent, England.

  McManus, Richard, Canterbury Christ Church Univ, North Holmes Rd, Canterbury, Kent,
  England.

  Ozkan, F. Gulcin, Kings Coll London, Bush House,30 Aldwych, London, England.

  Trzeciakiewicz, Dawid, Loughborough Univ, Epinal Way, Loughborough, Leics, England.'
author: McManus, Richard and Ozkan, F. Gulcin and Trzeciakiewicz, Dawid
author-email: 'richard.mcmanus@canterbury.ac.uk

  gulcin.ozkan@kcl.ac.uk

  d.g.trzeciakiewicz@lboro.ac.uk'
author_list:
- family: McManus
  given: Richard
- family: Ozkan
  given: F. Gulcin
- family: Trzeciakiewicz
  given: Dawid
da: '2023-09-28'
doi: 10.1093/oep/gpz065
eissn: 1464-3812
files: []
issn: 0030-7653
journal: OXFORD ECONOMIC PAPERS-NEW SERIES
keywords-plus: 'MONETARY-POLICY; ECONOMIC-CONDITIONS; EURO AREA; CONSTRAINTS; QUALITY;

  PRICES; MODEL; DEBT'
language: English
month: JAN
number: '1'
number-of-cited-references: '45'
pages: 317-349
papis_id: db0a4cb97a9c2fdb8e2b89596cfecbe7
ref: Mcmanus2021fiscalconsolidations
times-cited: '2'
title: 'Fiscal consolidations and distributional effects: which form of fiscal austerity
  is least harmful?'
type: article
unique-id: WOS:000649017300015
usage-count-last-180-days: '0'
usage-count-since-2013: '1'
volume: '73'
web-of-science-categories: Economics
year: '2021'