Many analysts expect the aging population to lead to a reduction in the growth of living standards. Income inequality – a problem that has been accentuated by the payroll tax hikes that were necessary to fund the public pension as the population ages – is becoming an increasing challenge at...

In this article, we examine the relationship between U.S. federal revenues and expenditures while relaxing the assumption of a symmetric adjustment process underlying the conventional cointegration and error correction model. Threshold autoregression and momentum threshold autoregression models...

This paper studies a model of equilibrium unemployment in which the ecacy of scal policy increases markedly in times of crises. A sudden rise in pessimism leads households to save rather than to spend, causing a fall in output and rising unemployment But as a persistent rise in unemployment...

This paper explores the implications of economic and political inequality for the comovement of government purchases with macroeconomic fluctuations. We set up and compute a heterogeneous-agent neoclassical growth model, where households value government purchases which are financed by income...

Can a large-scale defcit spending program speed up recovery after recession? To answer that question we calibrate a standard neoclassical growth model with US data and assume that an exogenous shock has driven aggregate output far below steady-state level. We calibrate the model such that a...

In this Paper, we investigate the relation between public and private consumption, by constructing a general government spending dataset, by function, for twelve European Union countries. In particular, we split government consumption into two categories. The first category includes defence,...

The macroeconomic effects of different ways of rolling back the welfare state are analysed. Cutting public spending on market goods induces a lower interest rate, a higher wage, a lower capital stock and a fall in employment. Cutting public employment or the labour income tax rate leads, in...

Cross-country evidence on inflation and inequality suggests that they are positively correlated. I explore the hypothesis that this correlation is the outcome of a distributional conflict underlying the determination of fiscal policy.

This paper describes recent trends on the efficiency of stabilisers in the European Union. Using both macro evidence on the cyclical sensitivity of budget deficit to economic activity, and micro evidence on the tax and expenditure profiles, we conclude, in agreement with the recent literature,...

In this paper we propose a new methodology to improve the estimation of structural budget balances in Slovakia. Major innovations compared to currently used methods are in using more robust output gap estimates, inclusion of pensions in the analysis, imposing consistency between various gap...