Fiscal Policy, Profits, and Investment

Alberto Alesina (), Silvia Ardagna, Roberto Perotti () and Fabio Schiantarelli ()

No 7207, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. In particular, we investigate how different types of fiscal policy affect profits and , as a result, investment. We find a sizable negative effect of public spending -- and in particular of its public wage component -- on business investment. This result is consistent with models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than the effect of taxes. Our results have important implications for the so called 'Non-Keynesian' (i.e. expansionary) effects of fiscal adjustments.

New Economics Papers: this item is included in nep-cdm and nep-pub
Date: 1999-07
Note: ME PE
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w7207.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Working Paper: Fiscal Policy, Profits, and Investment (2000)
Working Paper: Fiscal Policy, Profits and Investment (1999)
Journal Article: Fiscal Policy, Profits, and Investment (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:7207

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7207
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().