This paper summarizes the results of a large recent literature on multi year fiscal plans for deficit reduction (austerity). The key results are that deficit reduction policies based upon spending cuts are much less costly in terms of short run output losses than tax based adjustments. . On average fiscal adjustment based upon spending cuts have very samll otput costs and in come cases they are...

As governments, committed to neo-liberalism but still committed to pursuing national economic success, seek for policy approaches that evade international competition law, they may turn to favouring national champion cities, usually but not always capital cities. This usually also favours particular industries and firms, but only indirectly. This is not the same as policies for favouring backwa...

Various tax policies provide consumers with forms of insurance. Social security has the payoff characteristics of an annuity. The income tax provides consumers with a degree of Income insurance because the government shares part of the individual's income risk. Redistributive taxes can be used to spread aggregate income risks across different generations The effects of these and other tax polic...

The distributional impact of the public sector’s budget is a topic of enduring interest for economists and policymakers. The more recent literature on developing countries has focused almost exclusively on the expenditure side of the budget, as discussed in Chapter 2 But the few available studies on tax incidence in developing countries show that some tax policies have redistributive impacts – ...

In this paper we explore the effects of redistributive policies in a job search model where different degrees of self-confidence generate different arrival rates of new jobs. We find that the job search model is an useful framework to address behavioral concerns about personal motivation. We find that self-confidence and effort are complements in the performance of search activity. Moreover rew...

The paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice. We find that paradoxical consequences of interjurisdictional transfers can arise. While self-sufficient regions are necessarily identical with respect to policies and average incomes in our model, horizontal redistributive transfers lead to the divergence of regiona...

Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor supply elasticities on microdata...

The aim of this paper is to make a first step towards studying the role of social expenditure and its interaction with corporate taxation in determining the destination of foreign direct investment (FDI) flows. Using panel data for 18 OECD countries and measuring the extent of social welfare policies by the (public social expenditure)/GDP ratio, we find strong support for the conjecture that re...

This study attempts to measure the inefficiency associated with aggregate investment in a transitional economy. The inefficiency is decomposed into allocative and production inefficiency based on standard production theory. Allocative inefficiency is measured by disequilibrium investment demand. Institutional factors are then taken into consideration as possible explanatory variables of the dis...

This paper shows that an increase in corporate/labor/income tax rates may push an economy with tax evasion into an expansionary pattern, under increasing returns to scale. These effects would be reversed when the steady state is saddle-path stable. This model does not undertake a full identification. The interesting feature of our results is that fiscal policy in an economy with a significant u...