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Long-Term Effects of Fiscal Policy on the Size and Distribution of the Pie in the UK

Author

Listed:
  • Xavier Ramos
  • Oriol Roca-Sagales

Abstract

This paper provides a joint analysis of the output and distributional long-term effects of various fiscal policies in the UK, using a vector autoregression (VAR) approach. Our findings suggest that the long-term impact on GDP of increasing public spending and taxes is negative, and especially strong in the case of current expenditure. We also find significant distributional effects associated with fiscal policies, indicating that an increase in public spending reduces inequality while a rise in indirect taxes increases income inequality. Copyright (c) 2008 The Authors Journal compilation (c) Institute for Fiscal Studies, 2008.

Suggested Citation

  • Xavier Ramos & Oriol Roca-Sagales, 2008. "Long-Term Effects of Fiscal Policy on the Size and Distribution of the Pie in the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 29(3), pages 387-411, September.
  • Handle: RePEc:ifs:fistud:v:29:y:2008:i:3:p:387-411
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    Citations

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    Cited by:

    1. Leonel Muinelo‐Gallo & Oriol Roca‐Sagalés, 2011. "Economic Growth And Inequality: The Role Of Fiscal Policies," Australian Economic Papers, Wiley Blackwell, vol. 50(2-3), pages 74-97, September.
    2. Odusola, Ayodele, 2017. "Fiscal Policy, Redistribution and Inequality in Africa," UNDP Africa Reports 267032, United Nations Development Programme (UNDP).
    3. repec:bla:afrdev:v:29:y:2017:i:s1:p:1-14 is not listed on IDEAS
    4. Karen Davtyan, 2016. "Interrelation among Economic Growth, Income Inequality, and Fiscal Performance: Evidence from Anglo-Saxon Countries," Hacienda Pública Española, IEF, vol. 217(2), pages 37-66, June.
    5. M. Hakan Berument & Zulal Denaux & Yeliz Yalcin, 2012. "Turkish monetary policy and components of aggregate demand: a VAR analysis with sign restrictions model," Applied Economics, Taylor & Francis Journals, vol. 44(36), pages 4787-4798, December.
    6. UNDP Regional Bureau for Africa & Ayodele Odusola, "undated". "Fiscal Policy, Redistribution and Inequality in Africa," UNDP Africa Policy Notes 2017-08, United Nations Development Programme, Regional Bureau for Africa.
    7. Leonel Muinelo-Gallo & Oriol Roca-Sagalés, 2017. "Long-term effects of fiscal policy in Uruguay," Documentos de Trabajo (working papers) 17-02, Instituto de Economia - IECON.
    8. repec:taf:applec:v:50:y:2018:i:51:p:5521-5542 is not listed on IDEAS
    9. Luigi Marattin & Simone Salotti, 2014. "Consumption multipliers of different types of public spending: a structural vector error correction analysis for the UK," Empirical Economics, Springer, vol. 46(4), pages 1197-1220, June.
    10. Odusola, Ayodele, 2017. "Fiscal Space, Poverty and Inequality in Africa," UNDP Africa Economists Working Papers 268726, United Nations Development Programme (UNDP).
    11. Chatziantoniou, Ioannis & Duffy, David & Filis, George, 2013. "Stock market response to monetary and fiscal policy shocks: Multi-country evidence," Economic Modelling, Elsevier, vol. 30(C), pages 754-769.
    12. Muinelo-Gallo, Leonel & Roca-Sagalés, Oriol, 2013. "Joint determinants of fiscal policy, income inequality and economic growth," Economic Modelling, Elsevier, vol. 30(C), pages 814-824.
    13. repec:rac:ecchap:2017-08 is not listed on IDEAS
    14. repec:bap:journl:160206 is not listed on IDEAS
    15. repec:ira:wpaper:201405 is not listed on IDEAS
    16. Kollias, Christos & Papadamou, Stephanos & Psarianos, Iacovos, 2014. "Fiscal imbalances and asymmetric adjustment under Labour and Conservative governments in the UK," Research in Economics, Elsevier, vol. 68(3), pages 208-213.
    17. Yongzheng Liu & Jorge Martinez-Vazquez, 2010. "The Growth-Inequality Tradeo in the Design of Tax Structure: Evidence from a Large Panel of Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1320, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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