Dynamic Fiscal Policies, Unemployment, and Economic Growth
AbstractThis 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 the higher, the lower are the labour tax rate and the unemployment rate. Both government Ponzi games and constant-flow budget policies are shown not to be feasible. 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.
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Bibliographic InfoPaper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number 9/2003.
Length: 30 pages
Date of creation: Jun 2003
Date of revision:
Unemployment; Public debt; Economic growth; Overlapping generations;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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