The Impact of Productivity Growth on Government Fiscal Balances

Peter Dungan
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Peter Dungan: Adjunct Associate Professor, Department of Economics and Rotman School of Management at the University of Toronto

A chapter in The Review of Economic Performance and Social Progress 2002: Towards a Social Understanding of Productivity, 2002, vol. 2 from Centre for the Study of Living Standards, The Institutute for Research on Public Policy

Abstract: In this chapter, Peter Dungan investigates the sensitivity of Canadian government fiscal balances to alternative long-run productivity growth rates using elements of the FOCUS macroeconometric model to conduct simulations on a 'base-case' projection of the Canadian economy, and of its fiscal detail, through the year 2030. The simulation strategy employed here in part parallels the technique used by the Department of Finance in recent budgets and fiscal statements to estimate the implicit size of the 'fiscal dividend'. A total of five alternative growth paths and sensitivity tests are presented.

As Dungan points out changes in productivity growth rates can occur for a variety of reasons and can have many different possible effects on the economy. Therefore, these types of simulation exercises inevitably require a number of simplifying assumptions which must be taken into account in interpreting the results.

Keywords: Productivity; Fiscal Balances; Fiscal Policy; Revenues; Government Revenues; Taxes; Tax; Taxation; Social Programs; Social Spending; Social Policy; Expenditures; Government Expenditures; Government; Econometric Forecasting; Forecasting; FOCUS; Macroeconometric; Macro-econometric; Econometric Modeling (search for similar items in EconPapers)
JEL-codes: E62 E66 J24 (search for similar items in EconPapers)
Date: 2002
ISBN: 0-88645-198-1
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