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Dynamic Fiscal Policies, Unemployment, and Economic Growth

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  • Josten, Stefan Dietrich

    ()
    (Helmut Schmidt University, Hamburg)

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    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 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 Info

    Paper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number 9/2003.

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    Length: 30 pages
    Date of creation: Jun 2003
    Date of revision:
    Handle: RePEc:ris:vhsuwp:2003_009

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    Related research

    Keywords: Unemployment; Public debt; Economic growth; Overlapping generations;

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