MANY suspect governments of protecting increasingly wrinkly electorates over the young within the big austerity packages imposed since the financial crisis and recession. While youths have had a particularly rough ride within labour markets, the overall effects of the response to the crisis are a bit more complicated. A new issue of Fiscal Studies, an economic journal, published today compares the austerity packages implemented in six European countries (Britain, Italy, France, Spain, Ireland and Germany) and would seem to provide fodder for those who think the young have been given a raw deal.
First, look at investment. When there is a hole to be plugged, governments might be tempted to slash investment spending and maintain current spending. This is politically easier; current benefit claimants will squawk more loudly than those who might have used the now-cancelled roads. The papers show that in all countries other than France and Germany investment spending was cut more quickly than current spending--future generations are...Continue reading
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