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Self-defeating austerity? Evidence from 1930s' Britain
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Crafts, N. F. R. and Mills, T. C. (2015) Self-defeating austerity? Evidence from 1930s' Britain. European Review of Economic History, 19 (2). pp. 109-127. doi:10.1093/ereh/heu024 ISSN 1361-4916.
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Official URL: http://dx.doi.org/10.1093/ereh/heu024
Abstract
Self-defeating austerity entails “perverse effects” of fiscal consolidation such that fiscal indicators deteriorate. Inter alia, this depends on the size of the fiscal multiplier as Keynes (1933. The Means to Prosperity. London: Macmillan) underlined. We find that the government-expenditure multiplier was less than 1 in 1930s' Britain. Austerity was not self-defeating in the long run and even its initial impact probably did not raise the public debt-to-GDP ratio. In the later 1930s, there was a “fiscal free lunch” in that deficit-financed government spending would have improved public finances enough to pay for the interest on the extra debt.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | D History General and Old World > DA Great Britain H Social Sciences > HC Economic History and Conditions |
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| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Library of Congress Subject Headings (LCSH): | Depressions --1929 -- Great Britain, Debts, Public -- Great Britain -- 20th century, Government spending policy -- Great Britain -- 20th century, Economic development -- Great Britain -- 20th century | ||||||||
| Journal or Publication Title: | European Review of Economic History | ||||||||
| Publisher: | Oxford University Press | ||||||||
| ISSN: | 1361-4916 | ||||||||
| Official Date: | May 2015 | ||||||||
| Dates: |
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| Volume: | 19 | ||||||||
| Number: | 2 | ||||||||
| Page Range: | pp. 109-127 | ||||||||
| DOI: | 10.1093/ereh/heu024 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 17 August 2016 | ||||||||
| Date of first compliant Open Access: | 4 February 2017 |
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