Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fiscal Consolidation: Part 6. What Are the Best Policy Instruments for Fiscal Consolidation?

Contents:

Author Info

  • Robert P. Hagemann
Registered author(s):

    Abstract

    OECD countries face daunting fiscal challenges following the substantial surge in debt-GDP ratios during the past four years, from already high levels in many cases. Fiscal consolidation is now the order of the day, and it takes on greater urgency against the backdrop of imminent budgetary pressures from population ageing. While strong growth would help, the bulk of consolidation will require specific structural reforms to spending and revenue programmes to stabilise and then reduce debt-GDP ratios. On the spending side, many reform options offer budgetary savings through improved efficiency, without loss of desired outcomes or adverse equity impacts. Areas examined in this paper include health care, education, infrastructure, general public services, and transfer programmes. On the revenue side, countries’ tax systems are perforated by tax expenditures that cause inefficiencies, reduce revenue, and undermine fairness. Reducing the scope and scale of tax expenditures remains one of the most promising means of boosting revenues while improving economic performance. Shifting taxation toward less inefficient tax bases also holds much promise, including raising the importance of both property taxation and environmental levies. Even without quantifying all possible measures, the cumulative cuts in spending and increases in taxation could yield 6% of GDP on average across countries in consolidation, with somewhat more on the spending side. Consolidation budgétaire : Partie 6. Quels sont les meilleurs instruments de la consolidation budgétaire ? Les pays de l’OCDE sont confrontés à de considérables difficultés budgétaires par suite du brusque gonflement, depuis des niveaux dans bien des cas déjà élevés, de la dette publique par rapport au PIB ces quatre dernières années. L’assainissement budgétaire est désormais la priorité du moment et devient de plus en plus pressant du fait de l’imminence des tensions budgétaires dues au vieillissement de la population. Si une croissance vigoureuse constituerait une aide incontestable, on ne pourra faire l’économie, pour assainir les finances publiques, de réformes structurelles spécifiques des programmes de dépenses et de recettes afin de stabiliser, puis de faire baisser les ratios dette/PIB. Du côté des dépenses, de nombreuses voies de réforme permettent de réaliser des économies budgétaires en améliorant l’efficience, sans annihiler les résultats attendus ou avoir d’impacts défavorables du point de vue de l’équité. Au nombre des domaines étudiés dans ce document figurent la santé, l’éducation, les infrastructures, les services publics généraux et les programmes de transfert. Du côté des recettes, les régimes fiscaux des différents pays sont grevés par les dépenses fiscales qui sont sources d’inefficiences, amputent les recettes et sapent l’équité. Réduire la portée et l’ampleur des dépenses fiscales reste l’un des moyens les plus prometteurs de gonfler les recettes tout en améliorant la performance économique. La réorientation de l’imposition vers des assiettes fiscales moins inefficientes, notamment en donnant plus d’importance à l’imposition foncière et aux prélèvements environnementaux, est également très prometteuse. Même sans quantifier toutes les mesures possibles, les réductions de dépenses cumulées et le relèvement de l’imposition pourraient rapporter 6 % du PIB en moyenne dans les pays procédant à un assainissement de leurs finances publiques, la part de ce pourcentage attribuable aux réductions de dépenses étant un peu plus importante.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://dx.doi.org/10.1787/5k9h28kd17xn-en
    Download Restriction: no

    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 937.

    as in new window
    Length:
    Date of creation: 10 Jan 2012
    Date of revision:
    Handle: RePEc:oec:ecoaaa:937-en

    Contact details of provider:
    Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
    Phone: 33-(0)-1-45 24 82 00
    Fax: 33-(0)-1-45 24 85 00
    Email:
    Web page: http://www.oecd.org
    More information through EDIRC

    Related research

    Keywords: fiscal policy; fiscal consolidation; public finances; consolidation budgétaire; politique budgétaire; finances publiques;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
    2. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521322249.
    3. Jan Persson & Daeho Song, 2010. "The Land Transport Sector: Policy and Performance," OECD Economics Department Working Papers, OECD Publishing 817, OECD Publishing.
    4. Romain Bouis & Romain Duval, 2011. "Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond," OECD Economics Department Working Papers, OECD Publishing 835, OECD Publishing.
    5. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521311120.
    6. Duncan McVicar, 2008. "Why Have Uk Disability Benefit Rolls Grown So Much?," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 22(1), pages 114-139, 02.
    7. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research sawrgs1987, W.E. Upjohn Institute for Employment Research.
    8. Hansjörg Blöchliger, 2008. "Market Mechanisms in Public Service Provision," OECD Economics Department Working Papers, OECD Publishing 626, OECD Publishing.
    9. Frédéric Gonand & Isabelle Joumard & Robert W.R. Price, 2007. "Public Spending Efficiency: Institutional Indicators in Primary and Secondary Education," OECD Economics Department Working Papers, OECD Publishing 543, OECD Publishing.
    10. Hansjörg Blöchliger & Dae-Ho Song & Douglas Sutherland, 2012. "Fiscal Consolidation: Part 4. Case Studies of Large Fiscal Consolidation Episodes," OECD Economics Department Working Papers, OECD Publishing 935, OECD Publishing.
    11. Sveinbjörn Blöndal & Simon Field & Nathalie Girouard, 2002. "Investment in Human Capital Through Post-Compulsory Education and Training: Selected Efficiency and Equity Aspects," OECD Economics Department Working Papers, OECD Publishing 333, OECD Publishing.
    12. Paul O'Brien & Ann Vourc'h, 2002. "Encouraging Environmentally Sustainable Growth: Experience in OECD Countries," Empirica, Springer, Springer, vol. 29(2), pages 93-111, June.
    13. Sutherland, Douglas & Price, Robert & Gonand, Frédéric, 2009. "Improving public spending efficiency in primary and secondary education," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/7958, Paris Dauphine University.
    14. Orazio Attanasio & James Banks & Matthew Wakefield, 2004. "Effectiveness of tax incentives to boost (retirement) saving: theoretical motivation and empirical evidence," IFS Working Papers, Institute for Fiscal Studies W04/33, Institute for Fiscal Studies.
    15. Juan Ayuso & Juan F. Jimeno & Ernesto Villanueva, 2007. "The effects of the introduction of tax incentives on retirement savings," Banco de Espa�a Working Papers, Banco de Espa�a 0724, Banco de Espa�a.
    16. Kevin S. Milligan & David A. Wise, 2011. "Social Security and Retirement around the World: Historical Trends in Mortality and Health, Employment, and Disability Insurance Participation and Reforms - Introduction and Summary," NBER Working Papers 16719, National Bureau of Economic Research, Inc.
    17. Alberto F. Alesina & Silvia Ardagna, 2009. "Large Changes in Fiscal Policy: Taxes Versus Spending," NBER Working Papers 15438, National Bureau of Economic Research, Inc.
    18. Martin Feldstein & Daniel Feenberg & Maya MacGuineas, 2011. "Capping Individual Tax Expenditure Benefits," NBER Working Papers 16921, National Bureau of Economic Research, Inc.
    19. Sebastian Barnes & Romain Bouis & Philippe Briard & Sean Dougherty & Mehmet Eris, 2013. "The GDP Impact of Reform: A Simple Simulation Framework," OECD Economics Department Working Papers, OECD Publishing 834, OECD Publishing.
    20. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2009. "Governance matters VIII : aggregate and individual governance indicators 1996-2008," Policy Research Working Paper Series, The World Bank 4978, The World Bank.
    21. Douglas Sutherland & Robert W.R. Price & Isabelle Joumard & Chantal Nicq, 2007. "Performance Indicators for Public Spending Efficiency in Primary and Secondary Education," OECD Economics Department Working Papers, OECD Publishing 546, OECD Publishing.
    22. Corneo, Giacomo & Keese, Matthias & Schröder, Carsten, 2008. "Can governments boost voluntary retirement savings via tax incentives and subsidies? A German case study for low-income households," Economics Working Papers, Christian-Albrechts-University of Kiel, Department of Economics 2008,18, Christian-Albrechts-University of Kiel, Department of Economics.
    23. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(2), pages 339-57, April.
    24. Balazs Egert & Tomasz Kozluk & Douglas Sutherland, 2009. "Infrastructure and Growth: Empirical Evidence," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp957, William Davidson Institute at the University of Michigan.
    25. Pablo Antolín & Alain de Serres & Christine de la Maisonneuve, 2004. "Long-Term Budgetary Implications of Tax-Favoured Retirement Plans," OECD Economics Department Working Papers, OECD Publishing 393, OECD Publishing.
    26. Don Fullerton & Holly Monti, 2010. "Can Pollution Tax Rebates Protect Low-Income Families? The Effects of Relative Wage Rates," NBER Working Papers 15935, National Bureau of Economic Research, Inc.
    27. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 40(4), pages 1105-1166, December.
    28. Sónia Araújo & Douglas Sutherland, 2010. "Public-Private Partnerships and Investment in Infrastructure," OECD Economics Department Working Papers, OECD Publishing 803, OECD Publishing.
    29. Margit Molnar, 2012. "Fiscal Consolidation: Part 5. What Factors Determine the Success of Consolidation Efforts?," OECD Economics Department Working Papers, OECD Publishing 936, OECD Publishing.
    30. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers, OECD Publishing 932, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers, OECD Publishing 932, OECD Publishing.
    2. Nicholas Crafts, 2013. "Long-Term Growth in Europe: What Difference does the Crisis Make?," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 224(1), pages R14-R28, May.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:937-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.