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Rent-seeking competition from state coffers in a calibrated DSGE model of the euro area

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  • Konstantinos Angelopoulos
  • Apostolis Philippopoulos
  • Vanghelis Vassilatos

Abstract

We incorporate an uncoordinated redistributive struggle for extra fiscal privileges into an otherwise standard dynamic stochastic general equilibrium model. The main aim is to get model-consistent quantitative evidence of the extent of rent seeking. Our work is motivated by the common belief that interest groups compete with each other for privileged transfers, subsidies and tax treatments at the expense of the general public interest. The model is calibrated to the euro area as a whole, and to individual euro member-countries, over the period 1980-2003. We find that an important proportion of tax revenue is appropriated by rent seekers and that the introduction of rent seeking moves the model in the right direction vis-à-vis the data

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Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2007_29.

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Date of creation: Sep 2007
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Handle: RePEc:gla:glaewp:2007_29

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Keywords: Fiscal policy; real business cycles; rent seeking.;

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References

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Cited by:
  1. Di Bartolomeo Giovanni & Acocella Nicola & Tirelli Patrizio, 2013. "The comeback of inflation as an optimal public finance tool," wp.comunite 0100, Department of Communication, University of Teramo.

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