Lower Taxes, Lower Spending, Higher Employment

Mario Baldassarri and Francesco Busato
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Mario Baldassarri: University of Rome
Francesco Busato: Columbia University

Chapter 8 in Full Employment and High Growth in Europe, 2003, pp 134-213 from Palgrave Macmillan

Abstract: Abstract We showed previously that it is not possible to hope for a reduction in unemployment in Europe, even following a hypothetical international cycle of expansion, without instituting structural reforms. The inertial outlook is characterized by low growth, high unemployment, and noncompliance with the parameters of the Stability Pact. This would happen even amid an international economic cycle that is supposed to tend toward a steady phase of recovery in the years following the strong slowdown of the two years 2001–2002. As we’ll see herewith, if the international cycle were to instead extend the slowdown phase that was seen throughout 2002 over a longer time, the inertial prospects would look even worse. Predicting the obtainable results on the basis of this even more negative hypothesis, it is clear straightaway that in this possible eventuality, a structural reform policy would not only be necessary and more urgent, but, in relative terms, would have even more positive results on the economy.

Keywords: Unemployment Rate; Fiscal Policy; Free Riding; Full Employment; Dark Line (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-4039-3736-0_8

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DOI: 10.1057/9781403937360_8

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