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Employment and growth in Europe and the US: the role of fiscal policy composition

Tine Dhont (UGent) and Freddy Heylen (UGent)
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Abstract
We construct a simple endogenous growth model to analyse the relationship between the composition of fiscal policy, economic growth and employment. The government sets different tax rates on labour income, capital income, and private consumption to finance productive expenditures, utility-enhancing consumption expenditures, and transfers related to structural non-employment. Our model is able to explain the different employment and growth records of European countries and the US since the 1990s. We use the model to investigate the strength of the effects of various fiscal policy shocks on steady state employment and growth. We also develop the transitional dynamics for many variables, including welfare. Our results highlight the trade-offs that may occur between performance indicators, and between the short and the long-run.
Keywords
expenditures, taxation, OECD, long-run growth, endogenous growth, unemployment, economy, models

Citation

Please use this url to cite or link to this publication:

MLA
Dhont, Tine, and Freddy Heylen. “Employment and Growth in Europe and the US: The Role of Fiscal Policy Composition.” OXFORD ECONOMIC PAPERS-NEW SERIES 61.3 (2009): 538–565. Print.
APA
Dhont, T., & Heylen, F. (2009). Employment and growth in Europe and the US: the role of fiscal policy composition. OXFORD ECONOMIC PAPERS-NEW SERIES, 61(3), 538–565.
Chicago author-date
Dhont, Tine, and Freddy Heylen. 2009. “Employment and Growth in Europe and the US: The Role of Fiscal Policy Composition.” Oxford Economic Papers-new Series 61 (3): 538–565.
Chicago author-date (all authors)
Dhont, Tine, and Freddy Heylen. 2009. “Employment and Growth in Europe and the US: The Role of Fiscal Policy Composition.” Oxford Economic Papers-new Series 61 (3): 538–565.
Vancouver
1.
Dhont T, Heylen F. Employment and growth in Europe and the US: the role of fiscal policy composition. OXFORD ECONOMIC PAPERS-NEW SERIES. Oxford, England: Oxford University Press; 2009;61(3):538–65.
IEEE
[1]
T. Dhont and F. Heylen, “Employment and growth in Europe and the US: the role of fiscal policy composition,” OXFORD ECONOMIC PAPERS-NEW SERIES, vol. 61, no. 3, pp. 538–565, 2009.
@article{719146,
  abstract     = {We construct a simple endogenous growth model to analyse the relationship between the composition of fiscal policy, economic growth and employment. The government sets different tax rates on labour income, capital income, and private consumption to finance productive expenditures, utility-enhancing consumption expenditures, and transfers related to structural non-employment. Our model is able to explain the different employment and growth records of European countries and the US since the 1990s. We use the model to investigate the strength of the effects of various fiscal policy shocks on steady state employment and growth. We also develop the transitional dynamics for many variables, including welfare. Our results highlight the trade-offs that may occur between performance indicators, and between the short and the long-run.},
  author       = {Dhont, Tine and Heylen, Freddy},
  issn         = {0030-7653},
  journal      = {OXFORD ECONOMIC PAPERS-NEW SERIES},
  keywords     = {expenditures,taxation,OECD,long-run growth,endogenous growth,unemployment,economy,models},
  language     = {eng},
  number       = {3},
  pages        = {538--565},
  publisher    = {Oxford University Press},
  title        = {Employment and growth in Europe and the US: the role of fiscal policy composition},
  url          = {http://dx.doi.org/10.1093/oep/gpn034},
  volume       = {61},
  year         = {2009},
}

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