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- Title
Dynamic fiscal policies and unemployment in a simple endogenous growth model.
- Authors
Josten, Stefan
- Abstract
This paper analyzes the growth and employment effects of dynamic fiscal policies in an overlapping generations model with endogenous growth and imperfect labour markets. With balanced-budget policies, the modelled closed economy grows at a constant rate which is higher, the lower are the labour tax rate and the unemployment rate. Constant-flow budget policies are not feasible, while government Ponzi games are feasible only if economic agents have implausibly high savings rates. Furthermore, while constant-stock fiscal policies are sustainable, an increase in the debt-to-capital ratio is accompanied by higher taxes, a rise in unemployment and lower economic growth.
- Subjects
EFFECT of monetary policy on unemployment; PUBLIC debts -- Government policy; PONZI schemes; BUDGET deficits; LABOR market; ECONOMIC development
- Publication
International Tax & Public Finance, 2006, Vol 13, Issue 6, p701
- ISSN
0927-5940
- Publication type
Article
- DOI
10.1007/s10797-006-6603-5