Labor Market and Fiscal Policy During and After the Coronavirus

Paul Gomme

No 21003, Working Papers from Concordia University, Department of Economics

Abstract: COVID-related government outlays will increase the level of government debt. A macroeconomic model, calibrated to the U.S., quantitatively assesses potential responses to this higher debt. In terms of economic welfare, reducing debt through capital incomes tax hikes is the least desirable option considered: the associated tax base is small, and anticipating such a tax increase reduces capital accumulation. There is little to choose between fiscal austerity through government spending cuts versus raising labor income tax rates. Accommodating higher government debt is welfare-improving, but still requires substantial fiscal austerity owing to higher debt servicing costs.

Keywords: COVID-19; fiscal policy; government debt (search for similar items in EconPapers)
JEL-codes: E24 E62 H31 H62 H63 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2021-05-05
New Economics Papers: this item is included in nep-ban, nep-dge, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://paulgomme.github.io/corona-2021-05-05.pdf (application/pdf)

Related works:
Working Paper: Labor Market and Fiscal Policy During and After the Coronavirus (2020)
Working Paper: Labor Market and Fiscal Policy During and After the Coronavirus (2020)
Working Paper: Labor Market and Fiscal Policy During and After the Coronavirus (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:crd:wpaper:21003

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