AGNELLO, L. ...et al., 2017. The impact of fiscal consolidations on human development. Journal of International Development, In Press.
We find that fiscal austerity is associated with a reduction of human development standards, with the negative effect being particularly severe in the case of spending-driven consolidation episodes. Fiscal adjustments are especially damaging for human development in developing countries (namely, African and Latin American countries). Additionally, the empirical evidence shows that: (i) government stability is a crucial institutional determinant of human development; and (ii) while investment in physical capital can boost human development, government consumption and inflation are detrimentalto it.
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This work has been financed by Operational Programme for Competitiveness Factors -COMPETE and by National Funds through the FCT -Portuguese Foundation for Science and Technology within the remit of the project “FCOMP-01-0124-FEDER-037268 (PEst-C/EGE/UI3182/2013).” Castro also wishes to thank the financial support provided by the Portuguese Foundation for Science and Technology under the research grant SFRH/BSAB/113588/2015 (partially funded by COMPETE, QREN and FEDER).