Work

Fiscal Policy, Profits, and Investment

Year: 1999

Type: report

Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries.In particular, we investigate how different types of fiscal policy affect profits and , as a result, investment.We find a sizable negative effect of public spending --and in particular of its public wage component --on business investment.This result is consistent with models in which government employment creates wage pressure for the private sector.Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than the effect of taxes.Our results have important implications for the so called "non-Keynesian" (i.e.expansionary) effects of fiscal adjustments.

Source: National Bureau of Economic Research

DOI: 10.3386/w7207

Authors: Alberto Alesina, Silvia Ardagna, Roberto Perotti, Fabio Schiantarelli

Institutions: Boston College, National Bureau of Economic Research, Harvard University, Columbia University

Language: English

Topic: Fiscal Policy and Economic Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

Funder: National Science Foundation

OpenAlex ID: W2165329928

Cites: 42

Cited by: 105

Related to: 10