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How much can European governments squeeze out of their taxpayers?

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  • Jean-Michel Courtault

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

  • Riccardo Magnani

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

Abstract

In this paper we use the notion of distributable surplus, introduced by Allais (1943) and Luenberger (1992), to evaluate the capacity of European countries to repay their debts. In our analysis, we use Computable General Equilibrium (CGE) models to simulate di erent policies that can be implemented to achieve debt sustainability. We rst evaluate the quantity of distributable surplus that can be extracted from policies aiming at increasing the quantity of labor and/or capital available in the economy. We show that the results are very sensitive whether we consider de cits before and after the recent nancial and economic crises. Then, assuming that governments are able to capture all the distributable surpluses, we compute the date at which they are able to repay their debts. In particular, we nd that most EU countries, excepted Germany and to lesser extent France and the UK, cannot achieve debt sustainability. We nally discuss the usefulness of Eurobonds.

Suggested Citation

  • Jean-Michel Courtault & Riccardo Magnani, 2012. "How much can European governments squeeze out of their taxpayers?," Working Papers hal-00744544, HAL.
    • Handle: RePEc:hal:wpaper:hal-00744544
    Note: View the original document on HAL open archive server: https://hal.science/hal-00744544v2
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    References listed on IDEAS

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    1. Leon Bettendorf & Michael P. Devereux & Albert Van Der Horst & Simon Loretz & Ruud A. de Mooij, 2010. "Corporate tax harmonization in the EU [Taxing corporate income]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(63), pages 537-590.
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    More about this item

    Keywords

    CGE models; Distributable surplus; public de cit; sovereign debt; debt sustainability; CGE models.;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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