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An Evaluation of the Revenue side as a source of fiscal consolidation in high debt economies

  • Ritwik Banerjee

    ()

    (Department of Economics and Business, Aarhus University)

Unsustainable levels of debt in some European economies are causing considerable strain in the Euro area. Successful debt consolidation in high debt economies is one of the most important important objective for the European policy makers. I use a dynamic general equilibrium closed economy model to compute the dynamic Laffer Curves for Portugal, Ireland, Greece and Spain for different class of taxes. The general equilibrium effects of the interaction of labor tax, consumption tax and capital tax is demonstrated. Location of each economy on its Laffer curve suggests that there exists a scope for considerable revenue generation by raising consumption and labor tax rates but no such possibilities exist for capital tax rate. Thus revenue generation with certain tax rates as instruments, may hold a key to successful and sustained debt reduction.

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File URL: ftp://ftp.econ.au.dk/afn/wp/13/wp13_23.pdf
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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2013-23.

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Length: 28
Date of creation: 22 Oct 2013
Date of revision:
Handle: RePEc:aah:aarhec:2013-23
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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  1. Nicholas Apergis & James E. Payne & James W. Saunoris, 2012. "Tax-spend nexus in Greece: are there asymmetries?," Journal of Economic Studies, Emerald Group Publishing, vol. 39(3), pages 327-336, December.
  2. Holger Strulik & Timo Trimborn, 2011. "Laffer Strikes Again: Dynamic Scoring of Capital Taxes," DEGIT Conference Papers c016_074, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Trabandt, Mathias & Uhlig, Harald, 2006. "How Far Are We From the Slippery Slope? The Laffer Curve Revisited," CEPR Discussion Papers 5657, C.E.P.R. Discussion Papers.
  4. Karl-Josef Koch & Timo Trimborn & Thomas M. Steger, 2005. "Multi-Dimensional Transitional Dynamics: A Simple Numerical Procedure," Volkswirtschaftliche Diskussionsbeiträge 121-05, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  5. Eric M. Leeper & Shu-Chun Susan Yang, 2006. "Dynamic Scoring: Alternative Financing Schemes," Caepr Working Papers 2006-022, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  6. Chetty, Nadarajan & Weber, Andrea & Guren, Adam Michael & Day, Manoli, 2011. "Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins," Scholarly Articles 11878970, Harvard University Department of Economics.
  7. Gianluca Cafiso, 2012. "Debt developments and fiscal adjustment in the EU," Intereconomics: Review of European Economic Policy, Springer, vol. 47(1), pages 61-72, January.
  8. N. Gregory Mankiw & Matthew Weinzierl, 2004. "Dynamic Scoring: A Back-of-the-Envelope Guide," NBER Working Papers 11000, National Bureau of Economic Research, Inc.
  9. Trabandt, Mathias & Uhlig, Harald, 2011. "The Laffer curve revisited," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 305-327.
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