Fiscal Policy as a Determinant of Consumption Expenditure: The Estonian Case

Rasmus Kattai (), Kaie Kerem (), Kadrin Keres () and Martti Randveer ()
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Kaie Kerem: Department of Economics at Tallinn University of Technology
Kadrin Keres: Department of Economics at Tallinn University of Technology
Martti Randveer: Bank of Estonia

No 111, Working Papers from Tallinn School of Economics and Business Administration, Tallinn University of Technology

Abstract: The aim of the paper is to analyze and explain the impacts of fiscal policy on householdsí consumption. Specifically we analyze the role of both discretionary and non-discretionary fiscal policy on consumption. The authors examine tax system in Estonia and distribution of income between households. In the paper the impact of different tax systems on consumption has been estimated. The analysis shows that the exchange of flat income tax to progressive income tax have a little effect on smoothing of households consumption, but can increase the burden on general government budget. It also reveals that the role of fiscal policy on private consumption has been limited. This study will rely on analysis of statistical data on householdsí income and expenditures as well as on time-series analysis of aggregated data of GDP, consumption and income tax.

Keywords: tax reform; tax policy; consumption expenditure of household; automatic stabilizers. (search for similar items in EconPapers)
JEL-codes: E62 H20 (search for similar items in EconPapers)
Pages: 22
Date: 2004
Note: This research was conducted with support from the Estonian Science Foundation (Research Project 5146).
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Citations: View citations in EconPapers (1)

Published in Working Papers in Economics.School of Economics and Business Administration,Tallinn University of Technology (TUTWPE), Pages 117-138

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