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Improving the SGP: Taxes and Delegation Rather than Fines

Assar Lindbeck and Dirk Niepelt ()

No 733, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an "economic-theory" perspective on optimal corrective measures with the "legalistic" perspective adopted in the SGP.We discuss the advantages of replacing the Pact's rigid rules backed by fines with corrective taxes (as far as spillover effects are concerned) and procedural rules and limited delegation of fiscal powers (as far as domestic policy failures are concerned). This would not only enhance the efficiency of the Pact, but also render it easier to enforce.

Keywords: Stability and Growth Pact; spillover effects; policy failures; Pigouvian taxes; policy delegation (search for similar items in EconPapers)
JEL-codes: E63 F33 F42 H60 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2004-12-14
New Economics Papers: this item is included in nep-eec, nep-mac, nep-pbe and nep-reg
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0733

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