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The Impact of Fiscal Consolidation on Human Development
Author(s) -
Agnello Luca,
Castro Vitor,
Jalles João Tovar,
Sousa Ricardo M.
Publication year - 2018
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.3309
Subject(s) - austerity , economics , latin americans , consolidation (business) , human capital , government spending , developing country , human development (humanity) , development economics , fiscal policy , government revenue , investment (military) , economic policy , macroeconomics , economic growth , political science , welfare , finance , market economy , public finance , politics , law
We find that fiscal austerity is associated with a reduction of human development standards, with the negative effect being particularly severe in the case of spending‐driven consolidation episodes. Fiscal adjustments are especially damaging for human development in developing countries (namely, African and Latin American countries). Additionally, the empirical evidence shows that (i) government stability is a crucial institutional determinant of human development, and (ii) while investment in physical capital can boost human development, government consumption and inflation are detrimental to it. Copyright © 2017 John Wiley & Sons, Ltd.