We present new evidence showing that fiscal austerity strengthens support for redistribution, especially for the relatively well-off. Our theoretical model proposes two mechanisms to explain this heterogeneity in support for redistribution: ‘altruism’ and ‘appreciation’. We test our theoretical model’s predictions by matching attitudes reported in the British Social Attitudes Survey with local area-level spending cuts in England over the period 2010 to 2015. We exploit the spatial and temporal variation in spending cuts at the Local Authority level to compute a plausibly exogenous measure of the austerity shock. We find evidence for these two channels.

Public debt sustainability has garnered importance in the macroeconomic policy making of India, especially since the 1980s. This paper discusses the effectiveness of macroeconomic policies, viz. fiscal policy and monetary policy, to tackle the issue of debt sustainability considering the inter-dependencies between various macroeconomic indicators under the four sectors of the economy. To this end, we estimate a structural equation model with 14 equations which is further incorporated into the debt sustainability analysis using an indicator-based approach. The structural equations are estimated using the Generalised Method of Moments and the data covers annual samples for central government finances from 1981-82 through 2019-20. The simulation exercises reveal that fiscal policy is more effective than monetary policy in improving the debt sustainability indicators of India. Further, fiscal policy through changes in capital expenditure is found to outperform policy action through changes in revenue expenditure.

Tax compliance is vital for public revenue, especially in developing countries under IMF austerity programs. This study investigates how these programs influence voluntary tax compliance, analyzing data from the World Values Survey and IMF Monitoring of Fund Arrangements from 1980 to 2020. Using treatment effects and a difference-in-differences strategy, we find that IMF interventions negatively affect tax morale when cultural and trust factors are included. These programs may erode public trust and perceptions of fairness, reducing intrinsic motivations for compliance. The study emphasizes the need for IMF policies that consider socio-psychological elements and adapt to specific cultural contexts to improve tax compliance. Recommendations include tailoring IMF measures to enhance social development alongside economic stability, thus fostering sustainable growth. This approach could mitigate the negative impacts on tax morale and strengthen fiscal sustainability in developing nations.

This paper investigates the macroeconomic implications of a proposed tax reform that shifts the burden from labor income to capital income taxation within developed economies. As social insurance systems face sustainability challenges, this reform aims to broaden the tax base while enhancing economic efficiency and international competitiveness. Utilizing a two-region general-equilibrium model with overlapping generations, we analyze both short-term and long-term effects of this tax shift. Our findings indicate that reducing labor taxes can stimulate employment and increase net wage income, while simultaneously altering household savings behavior and capital accumulation dynamics. The model reveals a significant increase in domestic savings and a notable rise in net foreign assets, leading to a decrease in global interest rates. However, the transition may adversely affect retirees reliant on savings income, highlighting critical distributional consequences. Overall, the study underscores the complex interplay between tax policy, labor market dynamics, and household welfare.