IDEAS home Printed from https://ideas.repec.org/p/ssb/dispap/487.html
   My bibliography  Save this paper

Can welfare states outgrow their fiscal sustainability problems?

Author

Listed:

Abstract

The paper analyses the fiscal effects of productivity shifts in the private sector. Within a stylized model with inelastic labour supply, it shows that productivity shifts in sectors producing non-traded goods (N-sector) are irrelevant for the tax rates necessary to meet the government budget constraint. Also productivity shifts in the traded goods sector (T-sector) have a neutral fiscal effect, provided that the wage dependency of the tax bases and government expenditures are equal. If the wage dependency of expenditures exceeds that of revenues, tax rates must be increased in order to restore the government budget constraint. Simulations on a CGE model of the Norwegian economy confirm the theoretical results, and demonstrate that productivty growth on balance has an adverse fiscal effect. Moreover, the necessary increase in the tax rates of a productivity improvement in the T-sector is three times as high as the corresponding effect of a comparable productivity shift in the N-sector.

Suggested Citation

  • Erling Holmøy, 2006. "Can welfare states outgrow their fiscal sustainability problems?," Discussion Papers 487, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:487
    as

    Download full text from publisher

    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp487.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. repec:eme:ceapzz:s0573-855520140000293006 is not listed on IDEAS
    2. Rolf Aaberge & Ugo Colombino, 2014. "Labour Supply Models," Contributions to Economic Analysis,in: Handbook of Microsimulation Modelling, volume 127, pages 167-221 Emerald Publishing Ltd.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erling Holmøy, 2007. "Fiscal sustainability: Must the problem be diminished before we can see it?," Discussion Papers 499, Statistics Norway, Research Department.

    More about this item

    Keywords

    Fiscal sustainability; productivity growth; general equilibrium;

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:487. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (L Maasø). General contact details of provider: http://edirc.repec.org/data/ssbgvno.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.