ABSTRACT
This entry analyzes the term “fiscal sustainability.” In the analysis, it identifies several underlying assumptions, often implicit, that are used in defining the concept, and then formally discusses fiscal sustainability at both the national and subnational levels of government. Following these formal definitions, the entry raises several concerns about the definitions, and how, at times, the definitions may not be consistent with their underlying assumptions and how the definitions may be ignoring important conceptual problems—in particular, equity concerns, endogeneity concerns, and intergovernmental fiscal relationships. The entry then proposes extensions to the definition, including a better integration of the models, the consideration of options besides austerity, and a more formal inclusion of the role of institutions into the model. Following this, a more formal prototype of a model is proposed. The entry concludes by identifying potential unanticipated outcomes from adopting the concept of fiscal sustainability as a policy framework.
