Economics at your fingertips  

A numerical approach to fiscal policy, unemployment, and growth in Europe

Francesco Daveri () and Marco Maffezzoli ()

Macroeconomics from University Library of Munich, Germany

Abstract: We calibrate an infinite-horizon model with endogenous growth and unemployment on actual data from the largest countries in the European Union. Two types of balanced-budget fiscal policy experiments are studied. First, the effects of separately changing the tax rates on capital, labor and subsidies, as well as the replacement rates, are analyzed, assuming offsetting changes in lump-sum transfers. Second, we rule out offsetting transfers and study how effective is the cut in labor taxes when financed either raising capital taxation or reducing unemployment subsidies. We find two main results: (i) with lump-sum transfers, reducing labor taxes and unemployment subsidies is beneficial to both employment and growth, while cutting capital taxes is less beneficial; (ii) without transfers, cutting labor taxes is more effective when financed by a (modest) cut in unemployment subsidies rather than by a (sizable) increase in capital taxes. Sensitivity analysis shows that our results are robust to changes in a vast range of parameter values.

Keywords: Fiscal Policy; Taxation; Europe; Unemployment; Growth; Numerical Simulation; Trade Union (search for similar items in EconPapers)
JEL-codes: E13 E24 E62 J51 O41 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2000-05-31
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on A4; pages: 45; figures: included. Zip file containing separated pdf files for body, tables, and figures
References: Add references at CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed

Downloads: (external link) (application/zip) (application/pdf)

Related works:
Working Paper: A numerical approach to fiscal policy, unemployment and growth in Europe Downloads
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:

Access Statistics for this paper

More papers in Macroeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().

Page updated 2020-08-25
Handle: RePEc:wpa:wuwpma:0004010