Empirical evidence documents a discernible negative relationship between government size, as measured by income tax rates and the output share of government purchases, and the magnitude of macroeconomic fluctuations in OECD countries since 1960. This implies that both taxes and public spending...

Recent empirical evidence suggests that private consumption is crowded-in by government spending. This outcome violates existing macroeconomic theory, according to which the negative wealth effect brought about by a rise in public expenditure should decrease consumption. In this paper, we...

This paper studies the different economic configurations that may give rise to incomplete fiscal decentralization, with the vertical imbalance problem associated to it. Particularly, we look at an economy which has given up monetary policy and cannot monetize national or sub-national government...

It is known that, in the context of a real business cycle model with constant returns to scale and a balanced budget fiscal policy rule, steady state indeterminacy may arise as a result of endogenously determined labor income tax rates. This happens for a range of empirically plausible tax rates...

It is known that, in the context of a real business cycle model with constant returns to scale and a balanced budget fiscal policy rule, steady state indeterminacy may arise as a result of endogenously determined labor income tax rates. This happens for a range of empirically plausible tax rates...

The increase in income per capita is accompanied, in virtually all countries, by two changes in the structure of the economy: an increase in the share of government spending in GDP and an increase in female labor force participation. This paper suggests that the changes in female labor force...

This paper examines empirical issues on asymmetric effects of government spending. Increases in government spending under low real interest rates are not associated with the same increases in future tax liabilities as those under high real interest rates. Consequently, the negative impact from...

In recent times a number of countries initiated some important tax reforms to eliminate the distortions of double taxation. In this context, Australia adopted a dividend imputation system in 1987, while the US employed the 1986 Tax Reform Act (TRA). The analysis examines the effect on the level...

This paper reexamines the effect of expansionary fiscal policy on the real GDP in the presense of entrepreneurship - firms' activities to predict and react to changes in consumers' taste. The existence of partial crowding out in this paper generates a trade off between private consumption and...

Recent empirical studies suggest that the average marginal propensity to consume (MPC) has declined. This paper explains the declining trend of the MPC with a standard representative consumer model where borrowing constraints become more relaxed as suggested by data. With an increase in...