Estancamiento fiscal

El mecanismo que reduce crecimiento de productividad: estancamiento fiscal. Deuda pública elevada-> superávit primario con distorsiones fiscales-> menor inversión -> menor crecimiento de la productividad. 

Italia como ejemplo y más por venir.

Estancamiento fiscal

Los ratios deuda pública/PIB han alcanzado máximos históricos en la mayoría de las economías avanzadas. Esta columna estudia la conexión entre el crecimiento de la productividad, la política fiscal y la deuda pública. Utilizando un modelo teórico, sostiene que es posible un bucle de retroalimentación entre la política fiscal y el crecimiento. Los grandes superávits primarios están asociados a distorsiones fiscales que deprimen la inversión y el crecimiento de la productividad, y conducen a una mayor presión sobre los ratios deuda pública/PIB. Una caída en el estancamiento fiscal puede ser el resultado de efectos de histéresis o de espíritus animales pesimistas. Mientras tanto, salir del estancamiento fiscal requiere grandes intervenciones políticas que reduzcan el ratio deuda pública/PIB, como estrategias creíbles a favor del crecimiento.

Public debt-to-GDP ratios have climbed to record highs in most advanced countries, triggering a heated debate about their sustainability and macroeconomic implications (Blanchard et al. 2021, Auerbach and Yagan 2025). This debate is often based on the premise that productivity growth is exogenous to fiscal policy. Recent empirical evidence, however, suggests that firms’ investment and productivity growth do react to fiscal interventions. For instance, increases in corporate taxes and cuts in spending on public R&D seem to depress business investment and productivity growth (Croce et al. 2019, Antolin-Diaz and Surico 2022, Cloyne et al. 2022, Fieldhouse and Mertens 2023).

In some historical episodes, moreover, the correlation between fiscal policy and productivity growth is visible to the naked eye. Take the case of Italy, illustrated in Figure 1. The Italian public debt-to-GDP ratio rose substantially during the 1980s, due to high public expenditure. Since then, Italian governments had to come up with large primary surpluses – financed with a combination of high taxes and low public investment – to sustain the public debt. Interestingly, high primary surpluses have been accompanied by a sharp slowdown in productivity growth (Hassan and Ottaviano 2013). The fact that in many advanced economies public debt-to-GDP ratios are reaching Italian levels makes one wonder whether similar dynamics will soon happen elsewhere.

Figure 1 The evolution of public debt, primary surpluses, and productivity growth

Notes: This figure contrasts the evolution of public debt, primary surpluses, and productivity growth in Italy, against a sample of advanced economies, during 1980-2019.

Falling into fiscal stagnation

Motivated by these facts, in Fornaro and Wolf (2025) we propose a framework to study the connections between productivity growth, fiscal policy and public debt. Our model has two key features. First, as is typical in modern endogenous growth frameworks, productivity growth is the outcome of investment by profit-maximising firms. Second, to finance large primary surpluses the government has to impose fiscal distortions – in the form of high distortionary taxes or low public investments – which reduce the incentives to invest for the private sector.

These two elements generate a feedback loop between fiscal policy and growth. Intuitively, large primary surpluses are associated with high fiscal distortions, which depress firms’ investment and productivity growth. In turn, low growth puts upward pressure on the public debt-to-GDP ratio, calling for high primary surpluses to ensure the sustainability of public debt. Our key insight is that this amplification mechanism may push the economy into a state of fiscal stagnation, that is, a protracted period of low growth and high fiscal distortions.

Figure 2 shows graphically the interaction between productivity growth (g) and primary surpluses (s) implied by our model. The GG schedule captures the idea that large primary surpluses and high fiscal distortions constitute a drag on investment and growth. The FF schedule captures the notion that low growth forces the government to increase the primary surplus to ensure debt sustainability.

This two-way interaction between growth and fiscal policy implies that two stable steady states may coexist. In the first one, which we dub the ‘fiscally sound’ steady state, high growth allows the government to stabilise the debt-to-GDP ratio with a modest primary surplus. In the second one, which we dub the ‘fiscal stagnation’ steady state, low growth forces the government to run a large primary surplus to prevent the debt-to-GDP ratio from exploding. But doing so generates fiscal distortions, which feed back into low investment and weak growth, plunging the economy into a self-perpetuating state of stagnation.

Figure 2 The fiscally sound and the fiscal stagnation steady states

What makes the economy fall into fiscal stagnation? If the feedback loop between fiscal policy and growth is of moderate strength, the fall into fiscal stagnation happens through hysteresis effects. That is, in the aftermath of a shock causing a modest rise in the public debt-to-GDP ratio, the economy converges back to the fiscally sound steady state. In contrast, once public debt relative to GDP exceeds a threshold, a vicious cycle of declining growth and increases in fiscal distortions leads the economy to the fiscal stagnation steady state. Temporary shocks or small differences in initial conditions can therefore have large long-run effects.

If the feedback loop between fiscal policy and growth is sufficiently strong, moreover, fiscal stagnation can be the result of pessimistic animal spirits. In this case, expectations of low growth and high fiscal distortions become self-validating, and a wave of pessimism can shift the economy from fiscal soundness to stagnation.

Irrespective of whether it is driven by hysteresis effects or pessimistic animal spirits, a shift from the fiscally sound to the stagnation steady state can be interpreted as the result of self-defeating austerity (Fatas and Summers 2016). In fact, as shown in Figure 3, during the transition towards fiscal stagnation the increase in the primary surplus depresses growth so much that the debt-to-GDP ratio ends up not declining, or may even rise.

Figure 3 Falling into fiscal stagnation

Notes: This figure contrasts an economy that falls into fiscal stagnation (red dashed lines), against one that escapes it (blue solid lines). This divergence in long-run outcomes is due to a small difference in the initial public debt-to-GDP ratio.

Escaping fiscal stagnation: Austerity or pro-growth policies?

What is the optimal strategy to exit fiscal stagnation? The first insight from our model is that marginal policy changes won't do it. Exiting stagnation requires a big push, i.e. a large change in fiscal policy to reduce the public debt-to-GDP ratio.

In our model, there are two strategies that the government can pursue. The first one is fiscal austerity. Austerity, in theory, is simple. Increase the primary surplus today to lower public debt in the future. But austerity discourages investment and growth, because it is associated with high distortionary taxes and/or low public investment. Hence, exiting stagnation through austerity is painful and takes a long time, especially if animal spirits are pessimistic.

La otra estrategia, representada por las políticas favorables al crecimiento, es más atractiva. Las promesas creíbles de reducir las distorsiones fiscales impulsan la inversión y el crecimiento, reduciendo el ratio deuda pública/PIB al aumentar la producción futura. Pero, debido a un problema de consistencia temporal, esta estrategia requiere un compromiso por parte del gobierno.

Para ver este punto, consideremos el caso de los impuestos sobre los beneficios. Antes de que las empresas hayan hecho sus planes de inversión, el gobierno tiene un incentivo para prometer bajos impuestos sobre los beneficios futuros para impulsar la inversión y el crecimiento. Pero una vez que la inversión se ha hundido, el gobierno puede fijar un tipo impositivo más alto de lo prometido, con el fin de aumentar sus ingresos fiscales. Anticipándose a esto, el sector privado puede no creer los anuncios del gobierno de bajos impuestos futuros, en cuyo caso las políticas pro-crecimiento serán ineficaces. Salir del estancamiento mediante políticas favorables al crecimiento requiere, pues, un marco político que garantice la credibilidad de los planes fiscales.

Haciendo balance, nuestro documento sugiere que el estancamiento fiscal es un riesgo tangible, y evitarlo o salir de él requiere que las autoridades fiscales diseñen planes fiscales creíbles a favor del crecimiento.

De cara al futuro, creemos que nuestro marco será una herramienta útil para analizar otras propuestas políticas destinadas a evitar el riesgo de estancamiento fiscal. Algunos ejemplos son la emisión de bonos indexados al PIB (Acalin et al. 2016) y las políticas del lado de la demanda (Benigno y Fornaro 2018).

Nuestro modelo también podría utilizarse para revisar el marco fiscal europeo. En este sentido, nuestro marco sugiere que las políticas que afectan a la inversión de las empresas y al crecimiento de la productividad, como el gasto público en I+D, deberían recibir un tratamiento especial. Además, implica que las políticas destinadas a reducir la deuda heredada, como la propuesta por Ando et al. (2023), podrían ayudar a reactivar el crecimiento de la productividad en la UE.

References

Acalin, J, O Blanchard and P Mauro (2016), “The case for growth-indexed bonds in advanced economies today”, VoxEU.org, 16 February.

Ando, S, G Dell’Ariccia, P Gourinchas, G Lorenzoni, A Peralta-Alva and F Roch (2023), “How Europe can jointly issue debt without direct transfers”, VoxEU.org, 23 March.

Antolin-Diaz, J and P Surico (2022), “The long-run effects of government spending”, American Economic Review, forthcoming.

Auerbach, A and D Yagan (2025), “Robust fiscal stabilization”, VoxEU.org, 17 February.

Benigno, G and L Fornaro (2018), “Stagnation traps”, The Review of Economic Studies 85(3): 1425-1470.

Benigno, G and L Fornaro (2018), “Weak productivity growth and monetary policy: A Keynesian growth perspective”, VoxEU.org, 15 March.

Blanchard, O, A Leandro and J Zettelmeyer (2021), “Ditch the EU’s fiscal rules; develop fiscal standards instead”, VoxEU.org, 22 April.

Cloyne, J, J Martinez, H Mumtaz and P Surico (2022), “Short-term tax cuts, long-term stimulus”, NBER working paper.

Croce, M M, T T Nguyen, S Raymond and L Schmid (2019), “Government debt and the returns to innovation”, Journal of Financial Economics 132(3): 205–225.

Fatas, A and L Summers (2016), “Hysteresis and fiscal policy during the Global Crisis”, VoxEU.org, 12 October.

Fieldhouse, A J and K Mertens (2023), “The Returns to Government R&D: Evidence from US Appropriations Shocks”, Federal Reserve Bank of Dallas working paper.

Fornaro, L and M Wolf (2025), “Fiscal Stagnation”, CEPR Discussion Paper 20149.

Hassan, F and G Ottaviano (2013), “Productivity in Italy: the great unlearning”, VoxEU.org, 30 November.

 https://cepr.org/voxeu/columns/fiscal-stagnation