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2013 | OriginalPaper | Chapter

Europe: Is Austerity Compatible with Endogenous Growth?

Authors : Luigi Paganetto, Pasquale Lucio Scandizzo

Published in: Public Debt, Global Governance and Economic Dynamism

Publisher: Springer Milan

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Abstract

This paper revisits neoclassical and endogenous growth theory enlightening their link with austerity policies adopted nowadays in Europe. The main finding is that austerity is certainly harmful in the short run, if used as a policy instrument in a recession. Paradoxically, the only argument in favor of austerity is that it would give more power to future anty-ciclical policies (fiscal space argument). There is no evidence that it would improve development, moreover there is a weak support to the idea that it might contribute positively to resume endogenous growth. The main policy suggestion is that European economic policy has to be revised by adopting an endogenous growth perspective.

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Title: Europe: Is Austerity Compatible with Endogenous Growth?
Authors: Luigi Paganetto
Pasquale Lucio Scandizzo
Publisher: Springer Milan
Book: Public Debt, Global Governance and Economic Dynamism
Print ISBN: 978-88-470-5330-4

Electronic ISBN: 978-88-470-5331-1

Copyright Year: 2013
DOI: https://doi.org/10.1007/978-88-470-5331-1_15