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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Paganetto, L., Scandizzo, P.L. (2013). Europe: Is Austerity Compatible with Endogenous Growth?. In: Paganetto, L. (eds) Public Debt, Global Governance and Economic Dynamism. Springer, Milano. https://doi.org/10.1007/978-88-470-5331-1_15
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DOI: https://doi.org/10.1007/978-88-470-5331-1_15
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