Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315050 
Year of Publication: 
2025
Series/Report no.: 
GLO Discussion Paper No. 1592
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
In this paper, we analyse the effects on the economies of the European Union and the rest of the world, of several austerity policies implemented by the Southern European countries, i.e., Portugal, Italy, Greece, and Spain. In particular, we simulate the reduction in one point in the government deficit-to-GDP ratio in each of these countries, through several alternative policies, both from the spending side and the revenue side. The empirical methodology is based on a computable general equilibrium model, which incorporates the backward sectoral linkages and inter-country flows generated by fiscal consolidations. Our results show that these austerity policies were generally more painful, in terms of a fall in the levels of activity and a worsening in income distribution for labour, in the scenarios of tax increases rather than in those based on spending cuts. The effects on the rest of the European Union and the rest of the world were however mostly negligible.
Subjects: 
Computable general equilibrium
Austerity policies
Global economy
European Union
JEL: 
C68
H62
H20
H50
Document Type: 
Working Paper

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