FISCAL POLICY, EMPLOYMENT AND GROWTH: WHY IS CONTINENTAL EUROPE LAGGING BEHIND?

T. Dhont () and Freddy Heylen

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: In this paper we analyse the impact of distortionary taxes, transfers related to structural nonemployment and productive government expenditures on employment and long-run growth. Our theoretical model builds on Barro (JPE, 1990) which we extend by endogenizing the decision to work and by allowing two kinds of government expenditures. The model explains what we basically observe in the data: (i) higher growth and employment in the US (low taxes and low transfers related to structural non-employment), (ii) higher growth and employment in Scandinavia (high taxes, but high productive expenditures and low transfers related to structural non-employment) and (iii) lower growth and poor employment in continental Europe (high taxes, high transfers, lower productive government expenditures).

Keywords: fiscal policy; taxes; transfers; government spending; employment; unemployment; endogenous growth (search for similar items in EconPapers)
JEL-codes: E24 E62 J22 O41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2004-11
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:04/275

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