engleski

Who cares about regional inequalities? Effects of fiscal consolidation

The most recent global economic crisis and the concerns about long-term (un)sustainability of public finances has supported the implementation of budgetary consolidation measures. Although there are relatively large number of papers investigating the impact of fiscal consolidation on different aspect of economy (e.g. Wolff and Zacharias, 2007 ; Castro, 2007, 2011 ; Heim, 2010a, 2010b ; Afonso and Jalles, 2011, Agnello and Sousa, 2012) this paper represent unique attempt of investigating the effects of fiscal consolidation on regional inequalities. We test the hypothesis that in the period of fiscal consolidation, when some spending cut and/or tax hikes, less developed regions are not in position to protect themselves against undesired redistributive policies which put them in more disadvantaged position and increase regional inequalities. In empirical part of the paper we explore the impact of fiscal consolidation on regional inequalities on national levels among 13 EU member countries for period 1995-2009. Two groups of variables are particularly important for this study: measure of regional inequality and fiscal consolidation. Due to fact that recent literature recognizes problems with using cyclically-adjusted primary budget balance (CAPB) as a measure for fiscal consolidation (e.g. Romer and Romer, 2010, Devries et al., 2011) we extend regional empirical literature by using a new database of fiscal consolidation introduced by Devries et al. (2011). The results indicate the relevance of fiscal consolidation led by tax hikes for regional inequalities and not significant influence of fiscal consolidation led by spending cuts.

Regional inequalities ; institutions ; European Union ; World government indicator

Rad je naknadno objavljen u časopisu Regional Science Inquiry Journal , vol IX, n 1, pp. 135 – 144