Restoring Fiscal Sustainability in the Euro Area: Raise Taxes or Curb Spending?
With population ageing, fiscal consolidation has become of paramount importance for euro area countries. Consolidation can be pursued in various ways, with different effects on potential growth, which itself will be dragged down by ageing. A dynamic general equilibrium model with overlapping generat...
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Format: | Elektronisch E-Book |
Sprache: | English |
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Paris
OECD Publishing
2006
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Schriftenreihe: | OECD Economics Department Working Papers
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Online-Zugang: | Volltext |
Zusammenfassung: | With population ageing, fiscal consolidation has become of paramount importance for euro area countries. Consolidation can be pursued in various ways, with different effects on potential growth, which itself will be dragged down by ageing. A dynamic general equilibrium model with overlapping generations and a public finance block (including a pay-as-you-go pension regime, a health care system, non ageingrelated public spending and a stock of debt to be repaid) is used to compare the macroeconomic impact of four scenarios: a) increasing taxes to finance unchanged pensions and repay public debt, b) lowering future pension replacement rates and repaying public debt through a lower ratio of non ageing-related outlays to GDP, c) raising the retirement age by 1.25 years per decade and increasing taxes only to pay off debt, and d) increasing the retirement age by 1.25 years per decade and paying off debt through a lower ratio of non ageing-related expenditure to GDP. This last scenario is the one where growth is strongest: with gradual increases in the retirement age and spending restraint, average GDP growth in the 2010s would be 0.34 percentage point stronger than in a scenario where fiscal consolidation is achieved exclusively through tax hikes. The appropriate conclusion from the model is not that public spending is bad per se, but that cuts to lower-priority spending items can deliver surprisingly large income gains compared with the alternative of raising taxes |
Beschreibung: | 1 Online-Ressource (39 Seiten) 21 x 29.7cm |
DOI: | 10.1787/414711615127 |
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spelling | Cournède, Boris Verfasser aut Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? Boris Cournède and Frédéric Gonand = Rétablir la soutenabilité des finances publiques dans la zone euro : Augmenter les impôts ou maïtriser les dépenses ? / Boris Cournède et Frédéric Gonand Rétablir la soutenabilité des finances publiques dans la zone euro Paris OECD Publishing 2006 1 Online-Ressource (39 Seiten) 21 x 29.7cm txt rdacontent c rdamedia cr rdacarrier OECD Economics Department Working Papers With population ageing, fiscal consolidation has become of paramount importance for euro area countries. Consolidation can be pursued in various ways, with different effects on potential growth, which itself will be dragged down by ageing. A dynamic general equilibrium model with overlapping generations and a public finance block (including a pay-as-you-go pension regime, a health care system, non ageingrelated public spending and a stock of debt to be repaid) is used to compare the macroeconomic impact of four scenarios: a) increasing taxes to finance unchanged pensions and repay public debt, b) lowering future pension replacement rates and repaying public debt through a lower ratio of non ageing-related outlays to GDP, c) raising the retirement age by 1.25 years per decade and increasing taxes only to pay off debt, and d) increasing the retirement age by 1.25 years per decade and paying off debt through a lower ratio of non ageing-related expenditure to GDP. This last scenario is the one where growth is strongest: with gradual increases in the retirement age and spending restraint, average GDP growth in the 2010s would be 0.34 percentage point stronger than in a scenario where fiscal consolidation is achieved exclusively through tax hikes. The appropriate conclusion from the model is not that public spending is bad per se, but that cuts to lower-priority spending items can deliver surprisingly large income gains compared with the alternative of raising taxes Economics Euro Area Gonand, Frédéric ctb https://doi.org/10.1787/414711615127 Verlag kostenfrei Volltext |
spellingShingle | Cournède, Boris Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? Economics Euro Area |
title | Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? |
title_alt | Rétablir la soutenabilité des finances publiques dans la zone euro |
title_auth | Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? |
title_exact_search | Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? |
title_exact_search_txtP | Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? |
title_full | Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? Boris Cournède and Frédéric Gonand = Rétablir la soutenabilité des finances publiques dans la zone euro : Augmenter les impôts ou maïtriser les dépenses ? / Boris Cournède et Frédéric Gonand |
title_fullStr | Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? Boris Cournède and Frédéric Gonand = Rétablir la soutenabilité des finances publiques dans la zone euro : Augmenter les impôts ou maïtriser les dépenses ? / Boris Cournède et Frédéric Gonand |
title_full_unstemmed | Restoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending? Boris Cournède and Frédéric Gonand = Rétablir la soutenabilité des finances publiques dans la zone euro : Augmenter les impôts ou maïtriser les dépenses ? / Boris Cournède et Frédéric Gonand |
title_short | Restoring Fiscal Sustainability in the Euro Area |
title_sort | restoring fiscal sustainability in the euro area raise taxes or curb spending |
title_sub | Raise Taxes or Curb Spending? |
topic | Economics Euro Area |
topic_facet | Economics Euro Area |
url | https://doi.org/10.1787/414711615127 |
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