Efficiency and Welfare Effects of Fiscal Policy in Emerging Economies: The Case of Morocco

Ahmed El-Khalifi, Hicham Ouakil and Jose Torres ()
Authors registered in the RePEc Author Service: Ahmed El Khalifi

MPRA Paper from University Library of Munich, Germany

Abstract: The welfare cost of fiscal policy does not only depend on distortions by taxation, but also on how public revenues are spent in the economy, and on wealth inequality. Many of the government's spending activities are related to the provision of consumption goods and services, and the provision of public inputs. Hence, optimal taxation policy is not independent of how fiscal revenues are spent. This paper uses a model with two types of agents: Active households (who behave as Ricardian agents) and non-active government-dependent households (who behave as hand-to-mouth agents). The model economy considers a detailed government for both fiscal revenues and public spending. We compute welfare changes of different tax rates and alternative spending policies and quantify the trade-off of fiscal policy across the two groups of agents. The main results can be presented as follows: i) Distortions from some taxes on economic activity can be positive due to the presence of public inputs. ii) Output efficiency can be gained by changing the tax mix while keeping constant fiscal revenues. iii) Total welfare gains can be obtained by increasing tax rates, except the capital income tax, at the cost of reducing the welfare of active households.

Keywords: Fiscal policy; Active households; Government spending-dependent households; Taxes; Government Spending, Laffer curves; Welfare. (search for similar items in EconPapers)
JEL-codes: H21 H3 H42 (search for similar items in EconPapers)
Date: 2022-10-07
New Economics Papers: this item is included in nep-ara, nep-dge, nep-pbe and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/114896/2/MPRA_paper_114896.pdf original version (application/pdf)

Related works:
Journal Article: Efficiency and Welfare Effects of Fiscal Policy in Emerging Economies: The Case of Morocco (2024)
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:pra:mprapa:114896

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().