Public expenditure in time of crisis: are Italian policymakers choosing the right mix?
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In the ‘austerity debate’ a crucial issue is the composition of fiscal adjustment. This article provides empirical evidence on the relationship between economic crisis episodes and composition of public expenditure by examining the impact of economic crises on the share of different types of public spending in total public expenditure in the Italian regions. Our results suggest that fiscal consolidation strategies have not had growth-friendly expenditure composition. The crisis aggravated budgetary trade-offs by reducing the share of discretionary spending such as public investments.
KeywordsEconomic crisis Composition of government expenditure Panel data
JEL ClassificationR50 C23 E62
We are grateful to the two anonymous referees for their valuable comments and suggestions that have substantially enhanced the clarity and quality of the paper. We wish to thank participants to the IES Lunch Seminar (Napoli, April 19 2018). All remaining errors are, of course, our sole responsibility.
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