Fiscal Policy, Profits and Investment

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

No 2250, CEPR Discussion Papers from Centre for Economic Policy Research

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 sizeable 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.

Keywords: Fiscal Policy; Investment; Profits; Taxes (search for similar items in EconPapers)
JEL-codes: E62 H32 (search for similar items in EconPapers)
Date: 1999-10
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Citations: View citations in EconPapers (56)

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Related works:
Journal Article: Fiscal Policy, Profits, and Investment (2002)
Working Paper: Fiscal Policy, Profits, and Investment (2002)
Working Paper: Fiscal Policy, Profits, and Investment (2000)
Working Paper: Fiscal Policy, Profits, and Investment (1999)
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