A Macroeconomic Analysis of the Fiscal System in Egypt
We construct a dynamic general equilibrium model to analyze the fiscal situation of Egypt. We model Egypt as a small open economy that takes real interest rates and world prices of fuel as given. Since a large component of the government budget consists of pensions payments, we use an overlapping generations structure. The model contains descriptions of the public and private sector, as well as descriptions of the production sectors for a public good such as infrastructure, energy, and a final aggregate consumption good. The model pays special attention to the energy sector. We then calibrate the model to data from Egypt. The following policy reforms are considered: (i) reductions in pensions to public sector workers, (ii) reductions in pensions to private sector workers, (iii) reductions in the public sector pay premiums, (iv) decreases of the energy subsidies, and (v) a decrease of the public sector workforce. In each case we reduce the "expenditure" by 15 percent. For each of the reforms we adjust consumption taxes, labor taxes, "capital taxes", or public investments in infrastructure to satisfy the government budget constraint. We calculate the new steady states, the transition paths to the new steady states, and the size of the welfare gains or losses for all reforms. We find that due to the modest nature of the reforms, the effect of the policy reforms on GDP and consumption are modest. Often these gains are in the neighborhood of 1 percent. We find that welfare gains or losses can be sizable and that the largest gains from the reforms are attained when the freed up resources are used for infrastructure investments or for lowering the tax on company profits.
|Date of creation:||Oct 2010|
|Date of revision:||Oct 2010|
|Contact details of provider:|| Postal: |
Web page: http://www.towson.edu/cbe/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gerhard Glomm & B. Ravikumar, 1998. "Flat-Rate Taxes, Government Spending on Education, and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 306-325, January.
- Blankenau, William F. & Simpson, Nicole B., 2004. "Public education expenditures and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 583-605, April.
- SchmitzJr, James A., 2001.
"Government production of investment goods and aggregate labor productivity,"
Journal of Monetary Economics,
Elsevier, vol. 47(1), pages 163-187, February.
- James A. Schmitz, Jr., 1997. "Government production of investment goods and aggregate labor productivity," Staff Report 240, Federal Reserve Bank of Minneapolis.
- Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December.
- Colucci, Domenico, 2003. "Steady states in the OLG model with seignorage and long-lived agents," Research in Economics, Elsevier, vol. 57(4), pages 371-381, December.
- Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2005. "Personal Security Accounts and Mandatory Annuitization in a Dynastic Framework," CESifo Working Paper Series 1405, CESifo Group Munich.
- Gerhard Glomm & Juergen Jung & Changmin Lee & Chung Tran, 2009. "Public Sector Pension Policies and Capital Accumulation in Emerging Economies," Discussion Papers 2009-10, School of Economics, The University of New South Wales.
- Glomm, Gerhard & Jung, Juergen & Tran, Chung, 2009.
"Macroeconomic implications of early retirement in the public sector: The case of Brazil,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 33(4), pages 777-797, April.
- Gerhard Glomm & Juergen Jung & Chung Tran, 2006. "Macroeconomic Implications of Early Retirement in the Public Sector: The Case of Brazil," Caepr Working Papers 2006-008, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- Laurence J. Kotlikoff & Kent Smetters & Jan Walliser, 2001. "Finding a Way Out of America's Demographic Dilemma," NBER Working Papers 8258, National Bureau of Economic Research, Inc.
- Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
- Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:tow:wpaper:2010-17. 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: (Juergen Jung)
If references are entirely missing, you can add them using this form.