Fiscal Policy, Employment And Growth: Why Is Continental Europe Lagging Behind?
AbstractIn this paper we analyse the impact of distortionary taxes, transfers related to structural nonemployment and productive government expenditures on employment and long-run growth. Our theoretical model builds on Barro (JPE, 1990) which we extend by endogenizing the decision to work and by allowing two kinds of government expenditures. The model explains what we basically observe in the data: (i) higher growth and employment in the US (low taxes and low transfers related to structural non-employment), (ii) higher growth and employment in Scandinavia (high taxes, but high productive expenditures and low transfers related to structural non-employment) and (iii) lower growth and poor employment in continental Europe (high taxes, high transfers, lower productive government expenditures).
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Bibliographic InfoPaper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/275.
Length: 32 pages
Date of creation: Nov 2004
Date of revision:
fiscal policy; taxes; transfers; government spending; employment; unemployment; endogenous growth;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-EEC-2004-12-12 (European Economics)
- NEP-EEC-2004-12-27 (European Economics)
- NEP-MAC-2004-12-12 (Macroeconomics)
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.:
- Peter Lindert, 2004. "Social Spending and Economic Growth," Challenge, M.E. Sharpe, Inc., vol. 47(4), pages 6-16, July.
- Tine Dhont & Freddy Heylen, 2009.
"Employment and growth in Europe and the US--the role of fiscal policy composition,"
Oxford Economic Papers,
Oxford University Press, vol. 61(3), pages 538-565, July.
- T. Dhont & F. Heylen, 2006. "Employment and growth in Europe and the US - The role of fiscal policy composition," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/420, Ghent University, Faculty of Economics and Business Administration.
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