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What are the macroeconomic effects of tax adjustments in response to large public debt shocks in highly integrated economies? The answer from standard closed-economy models is deceptive, because they underestimate the elasticity of capital tax revenues and ignore crosscountry spillovers of tax...
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Europe's debt crisis casts doubt on the effectiveness of fiscal austerity in highly-integrated economies. Closed-economy models overestimate its effectiveness, because they underestimate tax-base elasticities and ignore cross-country tax externalities. In contrast, we study tax responses to debt...
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macroeconomic and welfare effects of reducing the firms' and workers' labour tax rates under alternative financing instruments …. Overall, a tax wedge reduction is beneficial in terms of both welfare and output, as long as the financing measure does not … harm private-sector productivity and/or the incentive for private capital investments over-proportionately. While financing …
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