When are fiscal adjustments successful? The role of social capital

Leibrecht, M. and Scharler, J. (2013) When are fiscal adjustments successful? The role of social capital. Applied Economics Letters, 20 (18). pp. 1640-1643. ISSN 1466-4291 doi: 10.1080/13504851.2013.829261

Abstract/Summary

High levels of social capital, by fostering cooperation and coordination, have direct implications for the intensity of collective action problems in a society. While it has been shown that high levels of social capital facilitate the implementation of institutional reforms we argue that the extent of social capital also determines the success of reforms. Specifically, we analyse fiscal adjustments in a sample of OECD countries and find that higher levels of social capital significantly increase the probability that adjustments are associated with persistent declines in debt-to-GDP ratios.