Revenue and Expenditure Gaps and Fiscal Consolidation: a Cross-Country Analysis

Several governments still need to adjust their fiscal balance after the Great Recession. In this paper, I construct a novel dataset to estimate the revenue potential and expenditure cutting space for a cross-section of 150 countries, and decompose their fiscal capacity into specific taxes and spending categories. Then, I compare the estimated fiscal potential with the consolidation required to stabilize the debt ratio, and classify countries into one of three groups: (i) countries that do not need further fiscal consolidation; (ii) countries that seem to have enough fiscal capacity to stabilize their debt ratio; and finally (iii) countries that do not appear to have enough fiscal potential and thus will need to implement major reforms.

Este documento se presentó en el Seminario de Economía núm, 309 del 25/07/2013