Working Paper: NBER ID: w29594
Authors: Joshua Aizenman; Yothin Jinjarak; Hien Nguyen; Donghyun Park
Abstract: We trace the linkages between the episodes of fiscal expansion and consolidation in 72 advanced and emerging and developing economies. The findings suggest that fiscal expansions are positively associated with economic growth, which in turn is positively linked with better sustainable development outcomes. The association between fiscal consolidation and growth as well as the sustainable development indicators, however, is not clear-cut. Jointly, more tax revenues and expenditures, together with better governance help explain the association between economic growth and inclusive development. High-income, high-tax-revenue, and manufacture-exporting economies have made significant progress on reducing disease-linked mortality and improving environment protection along with economic growth. Meanwhile, emerging and developing, low-tax-revenue, and commodity-exporting economies have gained notable improvement in poverty reduction, pre-primary enrolment and access to basic sanitation services and clean cooking fuels and technologies, and lowering bribery incidence. On average, the sampled economies have persistently achieved better primary goals such as sanitation, clean fuels and technologies. Achievements in mortality reduction, and environmental protection goals are shown more recently.
Keywords: fiscal policy; economic growth; sustainable development; tax revenue; public spending
JEL Codes: E62; F15; F34; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax revenue, primary expenses, political rights, government effectiveness (H59) | Sustainable development outcomes (Q01) |
| Fiscal expansion episodes (E62) | Economic growth (O49) |
| Economic growth (O49) | Fiscal expansion episodes (E62) |
| Economic growth (O49) | Sustainable development outcomes (Q01) |
| Fiscal policy (E62) | Economic growth (O49) |