Are Fiscal Consolidation Episodes Helpful for Public Sector Efficiency?
CESifo, Munich, 2022
CESifo Working Paper No. 9761
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We assess the consequences of fiscal consolidation episodes on public sector efficiency (scores) for 35 OECD countries for the 2007-2020 period. We find that fiscal consolidations improve public sector efficiency and results are robust across efficiency models. Moreover, peripheral euro-area economies and economies with debt-to-GDP ratios between 60% and 90% are those whose public sector efficiency scores improve more when fiscal consolidation episodes occur. The evidence that fiscal consolidations enhance spending efficiency is an additional argument for fiscal consolidations, from a policy perspective.
Public Choice
Fiscal Policy, Macroeconomics and Growth