[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/zbw/mpifgd/1112.html
   My bibliography  Save this paper

Fiscal austerity and public investment: Is the possible the enemy of the necessary?

Author

Listed:
  • Streeck, Wolfgang
  • Mertens, Daniel
Abstract
In most rich democracies one finds a tendency for the share in public finance that is available for discretionary spending to shrink. This is because tax revenues do not keep pace with simultaneous increases in fixed expenditures and growing pressures for fiscal consolidation. The present paper assesses the capacity of governments under conditions of fiscal austerity to shift financial resources within the shrinking share of discretionary expenditure from old to new purposes, and thereby fund future-oriented investment aimed at making societies more equitable and efficient. For this reason an indicator for soft public investment is developed, which includes public spending on education, R&D, family support, and active labor market policy. We present data for Germany, Sweden, and the United States for the years 1981 to 2007 in order to explore the general dynamics of consolidation policies under the expectation that far more ambitious consolidation attempts will be made in the coming decade. Our results suggest that the capacity of governments to shift resources towards soft public investment decreases as pressures for fiscal consolidation increase.

Suggested Citation

  • Streeck, Wolfgang & Mertens, Daniel, 2011. "Fiscal austerity and public investment: Is the possible the enemy of the necessary?," MPIfG Discussion Paper 11/12, Max Planck Institute for the Study of Societies.
    • Handle: RePEc:zbw:mpifgd:1112
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/48649/1/664685234.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Keman, Hans, 2010. "Cutting Back Public Investment after 1980: Collateral Damage, Policy Legacies and Political Adjustment," Journal of Public Policy, Cambridge University Press, vol. 30(2), pages 163-182, August.
    2. Jakob Haan & Jan Sturm & Bernd Sikken, 1996. "Government capital formation: Explaining the decline," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(1), pages 55-74, March.
    3. Richard Rose, 1990. "Inheritance Before Choice in Public policy," Journal of Theoretical Politics, , vol. 2(3), pages 263-291, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ross Beveridge & Philippe Koch, 2021. "Contesting austerity, de-centring the state: Anti-politics and the political horizon of the urban," Environment and Planning C, , vol. 39(3), pages 451-468, May.
    2. Haffert, Lukas & Mehrtens, Philip, 2013. "From austerity to expansion? Consolidation, budget surpluses, and the decline of fiscal capacity," MPIfG Discussion Paper 13/16, Max Planck Institute for the Study of Societies.
    3. Streeck, Wolfgang, 2013. "The politics of public debt: Neoliberalism, capitalist development, and the restructuring of the state," MPIfG Discussion Paper 13/7, Max Planck Institute for the Study of Societies.
    4. Gough, Ian, 2016. "Welfare states and environmental states: a comparative analysis," LSE Research Online Documents on Economics 63153, London School of Economics and Political Science, LSE Library.
    5. Jacques, Olivier & Noël, Alain, 2022. "The politics of public health investments," Social Science & Medicine, Elsevier, vol. 309(C).
    6. Oto Hudec & Ladislav SuhAnyi & NataSa UrbanèikovA, 2014. "Regional Decision-Making Criteria: Strategic Investment In The Central Europe," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 9(2), pages 104-117, May.
    7. Olivier Jacques & Alain Noel, 2022. "Austerity Reduces Public Health Investment," CIRANO Working Papers 2022s-02, CIRANO.
    8. Anton Hemerijck, 2016. "New EMU governance: Not (yet) ready for social investment?," Working Papers of the Vienna Institute for European integration research (EIF) 1, Institute for European integration research (EIF).
    9. Wolfgang Streeck, 2014. "The Politics of Public Debt: Neoliberalism, Capitalist Development and the Restructuring of the State," German Economic Review, Verein für Socialpolitik, vol. 15(1), pages 143-165, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:rwirep:0557 is not listed on IDEAS
    2. Nazim Belhocine & La-Bhus Fah Jirasavetakul, 2020. "Lessons from Two Public Sector Reforms in Italy," IMF Working Papers 2020/040, International Monetary Fund.
    3. Jäger, Philipp & Schmidt, Torsten, 2016. "The political economy of public investment when population is aging: A panel cointegration analysis," European Journal of Political Economy, Elsevier, vol. 43(C), pages 145-158.
    4. Mattia Osvaldo Picarelli & Willem Vanlaer & Wim Marneffe, 2019. "Does Public Debt Produce a Crowding Out Effect for Public Investment in the EU?," Working Papers 36, European Stability Mechanism.
    5. Philipp Jäger & Torsten Schmidt, 2015. "The Political Economy of Public Investment when Population is Aging – A Panel Cointegration Analysis," Ruhr Economic Papers 0557, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. Maxime MENUET & Alexandru MINEA & Patrick VILLIEU, 2017. "Public Debt, Endogenous Growth Cycles and Indeterminacy," LEO Working Papers / DR LEO 2467, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    7. Hans Pitlik & Michael Klien & Stefan Schiman-Vukan, 2017. "Stabilitätskonforme Berücksichtigung nachhaltiger öffentlicher Investitionen," WIFO Studies, WIFO, number 60595, March.
    8. Gupta, Sanjeev & Liu, Estelle X. & Mulas-Granados, Carlos, 2016. "Now or later? The political economy of public investment in democracies," European Journal of Political Economy, Elsevier, vol. 45(C), pages 101-114.
    9. Ward Romp & Jakob De Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(S1), pages 6-52, April.
    10. Juan González Alegre, 2010. "Fiscal decentralization and intergovernmental grants: the European regional policy and Spanish autonomous regions," Working Papers 2010/6, Institut d'Economia de Barcelona (IEB).
    11. Lobna M. Abdellatif & Mohamed Zaky & Mohamed Ramadan, 2019. "Transparency of law making and fiscal democracy in the Middle East," Public Sector Economics, Institute of Public Finance, vol. 43(1), pages 49-77.
    12. Ibrahim Tutar & Aysit Tansel, 2012. "An Analysis Of Political And Institutional Power Dispersion: The Case Of Turkey," Contemporary Economic Policy, Western Economic Association International, vol. 30(4), pages 548-565, October.
    13. Noel Rapa & Abigail Marie Rapa, "undated". "The macroeconomic effects of closing the public sector capital gap in Malta," CBM Policy Papers PP/07/2019, Central Bank of Malta.
    14. Amin Karimu & George Adu & George Marbuah & Justice Tei Mensah & Franklin Amuakwa-Mensah, 2017. "Natural Resource Revenues and Public Investment in Resource-rich Economies in Sub-Saharan Africa," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 107-130, November.
    15. repec:ebl:ecbull:v:5:y:2005:i:2:p:1-12 is not listed on IDEAS
    16. Suescun, Rodrigo, 2005. "Fiscal space for investment in infrastructure in Colombia," Policy Research Working Paper Series 3629, The World Bank.
    17. Mar Delgado-Téllez & Esther Gordo & Iván Kataryniuk & Javier J. Pérez, 2022. "The decline in public investment: ``social dominance’’ or too-rigid fiscal rules?," Applied Economics, Taylor & Francis Journals, vol. 54(10), pages 1123-1136, February.
    18. repec:ces:ifodic:v:1:y:2003:i:1:p:14567839 is not listed on IDEAS
    19. Robert A.J. Dur & Ben D. Peletier & Otto H. Swank, 1997. "The Effect of Fiscal Rules on Public Investment if Budget Deficits are Politically Motivated," Tinbergen Institute Discussion Papers 97-125/1, Tinbergen Institute.
    20. Moulaye Bamba & Jean-Louis Combes & Alexandru Minea, 2020. "The effects of fiscal consolidations on the composition of government spending," Applied Economics, Taylor & Francis Journals, vol. 52(14), pages 1517-1532, March.
    21. Amin Karimu & George Adu & George Marbuah & Justice Tei Mensah & Franklin Amuakwa-Mensah, 2017. "Natural Resource Revenues and Public Investment in Resource-rich Economies in Sub-Saharan Africa," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 107-130, November.
    22. Alexandru Minea & Patrick Villieu, 2009. "Borrowing to Finance Public Investment? The 'Golden Rule of Public Finance' Reconsidered in an Endogenous Growth Setting," Fiscal Studies, Institute for Fiscal Studies, vol. 30(1), pages 103-133, March.
    23. Streeck, Wolfgang, 2015. "The rise of the European consolidation state," MPIfG Discussion Paper 15/1, Max Planck Institute for the Study of Societies.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:mpifgd:1112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/mpigfde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.