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Rent-Seeking Competition from State Coffers: A Calibrated DSGE Model of the Euro Area

Author

Listed:
  • Konstantinos Angelopoulos
  • Apostolis Philippopoulos
  • Vanghelis Vassilatos

Abstract

This paper incorporates an uncoordinated struggle for extra fiscal favors into an otherwise standard Dynamic Stochastic General Equilibrium model. This reflects the popular belief that interest groups compete for privileged transfers and tax treatment at the expense of the general public interest, and so the aggregate economy stagnates. The model is calibrated to the euro area over the period 1980-2003. Our results show that rent-seeking competition can contribute to explaining the European macroeconomic experience. We also get quantitative evidence of the fraction of collected tax revenues grabbed by rent seekers.

Suggested Citation

  • Konstantinos Angelopoulos & Apostolis Philippopoulos & Vanghelis Vassilatos, 2005. "Rent-Seeking Competition from State Coffers: A Calibrated DSGE Model of the Euro Area," CESifo Working Paper Series 1644, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1644
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1644.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Konstantinos Angelopoulos & Apostolis Philippopoulos & Vanghelis Vassilatos, 2007. "Rent-seeking competition from state coffers in a calibrated DSGE model of the euro area," Working Papers 2007_29, Business School - Economics, University of Glasgow.
    2. repec:dau:papers:123456789/179 is not listed on IDEAS
    3. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers 10-10, Carleton University, Department of Economics.
    4. Wolfgang Eggert & Peter Birch Sørensen, 2007. "The Effects of Tax Competition when Politicians Create Rents to Buy Political Support," EPRU Working Paper Series 07-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    5. Eggert, Wolfgang & Sørensen, Peter Birch, 2008. "The effects of tax competition when politicians create rents to buy political support," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1142-1163, June.

    More about this item

    Keywords

    rent seeking; fiscal policy; real business cycles;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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