Of ten fiscal adjustment cases, only two support expansionary austerity claims

Evidence

To hone in on the particulars of these successful cases and fine-tune the policy lessons, Alesina and Ardanga select ten cases of fiscal adjustment: Ireland (twice), Australia, Belgium, Denmark, Canada, Netherlands, Sweden, Greece, and Italy (twice, but one is discounted). All occur during the mid-1980s through the mid-1990s. The results are remarkable, in part for their modesty. Of the ten cases (a limited number drawn from a distinct period to keep the sample manageable) only “two cases appear unambiguously expansionary: Ireland 1987–9 and Australia.” Denmark, per contra Giavazzi and Pagano, now appears to be “mixed.” Notably, “Canada, Netherlands, Sweden, Ireland and Greece show no sign of an expansionary fiscal advantage.” Belgium is “somewhat unclear,” while in Italy it was too soon to tell. In short, of the ten cases examined in detail, only two support the thesis advanced so powerfully on the basis of the earlier econometric tests: cuts lead to growth if and only if they are on the expenditure side. — Mark Blyth, Austerity, 467

Categorization

• XREF: Directly complicates the expansionary austerity thesis that Mattei and the broader austerity literature critique — this is the empirical underbelly of the ‘there is no alternative’ claim. — connects to: Expansionary austerity cases depend on conditions absent in the Eurozone — Mark Blyth, Austerity: The History of a Dangerous…, 483; Austerity’s success cases are few and possibly wrong while its failures are demonstrable — Mark Blyth, Austerity: The History of a Dangerous…, 479; Austerity only rarely works and its success conditions do not apply today — Mark Blyth, Austerity: The History of a Dangerous…, 274 (+1 more)
• SEED: Strong angle: the empirical case for austerity was built on two outliers (Ireland, Australia) while the theory was presented as universally law-like — a study in how thin evidence gets elevated to doctrine.

Broader Connections

• Austerity only rarely works and its success conditions do not apply today #corroborates (0.90) — Mark Blyth, Austerity, 274
• Austerity’s success cases are few and possibly wrong while its failures are demonstrable #corroborates (0.85) — Mark Blyth, Austerity, 479
• Expansionary austerity cases depend on conditions absent in the Eurozone #qualifies (0.82) — Mark Blyth, Austerity, 483
• Austerity theory only holds in a special case unlike actual economies #corroborates (0.78) — Mark Blyth, Austerity, 480