How Do Laffer Curves Differ Across Countries?

Mathias Trabandt and Harald Uhlig ()

No 17862, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We seek to understand how Laffer curves differ across countries in the US and the EU-14, thereby providing insights into fiscal limits for government spending and the service of sovereign debt. As an application, we analyze the consequences for the permanent sustainability of current debt levels, when interest rates are permanently increased e.g. due to default fears. We build on the analysis in Trabandt and Uhlig (2011) and extend it in several ways. To obtain a better fit to the data, we allow for monopolistic competition as well as partial taxation of pure profit income. We update the sample to 2010, thereby including recent increases in government spending and their fiscal consequences. We provide new tax rate data. We conduct an analysis for the pessimistic case that the recent fiscal shifts are permanent. We include a cross-country analysis on consumption taxes as well as a more detailed investigation of the inclusion of human capital considerations for labor taxation.

JEL-codes: E0 E13 E2 E3 E62 H0 H2 H3 H6 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-eur, nep-mac and nep-pbe
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Published as How Do Laffer Curves Differ across Countries? , Mathias Trabandt, Harald Uhlig. in Fiscal Policy after the Financial Crisis , Alesina and Giavazzi. 2013

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Related works:
Chapter: How Do Laffer Curves Differ across Countries? (2012)
Working Paper: How do Laffer curves differ across countries? (2012)
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