1. Emigration and Fiscal Austerity in the Greek Depression
- Author:
- Eugenia Vella
- Publication Date:
- 05-2021
- Content Type:
- Policy Brief
- Institution:
- Hellenic Foundation for European and Foreign Policy (ELIAMEP)
- Abstract:
- What is the role of emigration in a deep recession when the government implements fiscal consolidation? Our macroeconomic model simulations show that fiscal austerity accounts for 1/3 of the output drop in the Greek Depression and more than 10% of migration outflows. In a no-emigration counterfactual scenario, the model predicts a smaller output fall by 20%. We also uncover a novel bi-directional link between emigration and austerity. On the one hand, labour income tax hikes induce prolonged migration outflows, while spending cuts exert a smaller effect. On the other hand, emigration increases the required tax hike and time to meet a given debt target due to endogenous revenue leakage. In terms of unemployment, temporary gains from emigration are reversed over time.
- Topic:
- Austerity, Fiscal Policy, Emigration, and Economic Crisis
- Political Geography:
- Europe and Greece