Belgium has effected a remarkable fiscal adjustment, best illustrated by the decline in its public debt. While benefiting from an appreciable decline in interest rates, most of the underlying consolidation reflected a considerable increase in the tax burden, one of the highest in the...

This paper develops and calibrates a simple general equilibrium model with two types of labor and capital for the French economy. The simulation results indicate that targeted reductions in employer social security taxes have six times as large an effect on employment as untargeted reductions...

In designing policy measures, including possible social safety nets, targeted to the poor, it is important to fully understand the efficiency implications of these measures. There is abundant macroeconomic literature on their negative effects on the poor’s work effort. The literature, however,...

This paper examines the extent to which conclusions of cross-country studies of private savings are robust to allowing for the possible heterogeneity of savings behavior across countries and the inclusion of dynamics. It shows that neglecting heterogeneity and dynamics can lead to misleading...

Anecdotal evidence relates corruption with high levels of military spending. This paper tests empirically whether such a relationship exists. The empirical analysis is based on data from four different sources for up to 120 countries in the period 1985–98. The association between military...

The paper examines empirically the question of whether more unequal societies spend more on income redistribution than their more egalitarian counterparts. Theoretical arguments on this issue are inconclusive. The political economy literature suggests that redistributive spending is higher in...

The paper evaluates whether a monetary aggregate can serve as a useful predictor of inflation, using recent developments in the principle of cointegrated variables. M2 but not M1 is cointegrated with relevant price, transactions, and rate of return variables. However, deviations of M2 from its...

This Selected Issues paper investigates the possible contribution of activation strategies—in a broad sense—to improve employment rates in Finland. It summarizes recent labor market developments in Finland, and investigates respectively the limitation of current unemployment and...