Rent-seeking competition from state coffers in a calibrated DSGE model of the euro area

Konstantinos Angelopoulos (), Apostolis Philippopoulos () and Vanghelis Vassilatos

Working Papers from Department of Economics, University of Glasgow

Abstract: We incorporate an uncoordinated redistributive struggle for extra fiscal privileges into an otherwise standard dynamic stochastic general equilibrium model. The main aim is to get model-consistent quantitative evidence of the extent of rent seeking. Our work is motivated by the common belief that interest groups compete with each other for privileged transfers, subsidies and tax treatments at the expense of the general public interest. The model is calibrated to the euro area as a whole, and to individual euro member-countries, over the period 1980-2003. We find that an important proportion of tax revenue is appropriated by rent seekers and that the introduction of rent seeking moves the model in the right direction vis-à-vis the data

Keywords: Fiscal policy; real business cycles; rent seeking. (search for similar items in EconPapers)
JEL-codes: E62 E32 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-eec and nep-mac
Date: 2007-09
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Persistent link: http://EconPapers.repec.org/RePEc:gla:glaewp:2007_29

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