Automatic fiscal stabilisers: Recent evolution and policy options to boost their effectiveness

Alessandro Maravalle and Lukasz Rawdanowicz ()

No 1636, OECD Economics Department Working Papers from OECD Publishing

Abstract: Building on the automatic fiscal stabilisers literature, this paper assesses how automatic stabilisers have evolved over the past two decades by analysing changes in the personal income tax and social benefit systems. In three-quarters of the 35 OECD countries analysed, indicators of the strength of automatic stabilisers (aggregate elasticities of household income after tax with respect to the cycle and aggregate net replacement rates) changed little or moderately over the past two decades, suggesting broadly stable automatic stabilisers of household disposable income. The paper discusses pros and cons of several policy options to strengthen automatic stabilisers in the current environment. The effectiveness and possible side effects, particularly related to disincentives to work, vary across policy options. Consequently, policy reform proposals should be carefully assessed in a country-specific context and take into account other important policy objectives of tax and benefit systems.

Keywords: automatic fiscal stabilisers; business cycles; fiscal policy (search for similar items in EconPapers)
JEL-codes: E32 E6 H31 H6 (search for similar items in EconPapers)
Date: 2020-12-15
New Economics Papers: this item is included in nep-lab, nep-mac and nep-pbe
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1636-en

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