Public debt and relative prices in a cross-section of countries
Vahagn Galstyan and
Adnan Velic ()
Review of World Economics (Weltwirtschaftliches Archiv), 2018, vol. 154, issue 2, 229-245
Abstract This paper examines the effects of debt and distortionary labor taxation on the long-run behavior of the relative price of nontraded goods. At the theoretical level, in a two-sector open economy model we demonstrate that higher public debt, associated with higher taxation, contracts labor supply in both traded and nontraded goods sectors. Relative prices move inversely with relative supply shifts which, in turn, depend on relative factor intensities. At the empirical level, for a panel of advanced economies, we find statistically significant effects of public debt and taxes on the relative price of nontraded goods, with higher debt and taxes associated with higher relative prices.
Keywords: Labor taxation; Public debt; Government spending; Relative prices (search for similar items in EconPapers)
JEL-codes: F00 F41 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10290-018-0306-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
Working Paper: Public Debt and Relative Prices in a Cross-Section of Countries (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:weltar:v:154:y:2018:i:2:d:10.1007_s10290-018-0306-8
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10290/PS2
Access Statistics for this article
Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann
More articles in Review of World Economics (Weltwirtschaftliches Archiv) from Springer, Institut für Weltwirtschaft (Kiel Institute for the World Economy) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().