The Impact of Fiscal Policy on Profits

Margarita Katsimi and Vassilis Sarantides

No 2849, CESifo Working Paper Series from CESifo

Abstract: This paper investigates the impact of fiscal policy on profits using panel data for 19 high-income OECD countries during the period 1975-1999. We estimate a profit equation in which profits depend on a set of fiscal variables. Our empirical method is based on a consistent treatment of the government budget constraint, and we try to disentangle the effects of different spending and taxation items. As far as public spending is concerned, our results strongly suggest that capital expenditures are associated with higher profits, while expenditures on wages and salaries deteriorate profits. At the same time our results indicate that transport and communication expenditures increase profits, while the opposite holds for defense expenditures. On the revenue side, both direct and indirect taxation tend to decrease profits. However, a more detailed sub-division of direct taxation indicates that social security contributions have a neutral effect on profits.

Keywords: fiscal policy; profits; quality of public expenditure (search for similar items in EconPapers)
JEL-codes: E62 H32 H54 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp2849.pdf (application/pdf)

Related works:
Journal Article: THE IMPACT OF FISCAL POLICY ON PROFITS (2012)
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: https://EconPapers.repec.org/RePEc:ces:ceswps:_2849

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().