Fiscal austerity measures: spending cuts vs. tax increases

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dc.contributor.authorGlomm, Gerhard
dc.contributor.authorJung, Juergen
dc.contributor.authorTran, Chung
dc.contributor.departmentTowson University. Department of Economicsen_US
dc.date.accessioned2018-05-15T21:12:19Z
dc.date.available2018-05-15T21:12:19Z
dc.date.issued2013-08-19
dc.description.abstractWe formulate an overlapping generations model with skill heterogeneity and productive and non-productive government programs to study the macroeconomic and intergenera- tional welfare effects caused by risk premium shocks and government debt reductions. We demonstrate that in a small open economy with a high level of debt-to-GDP ratio a small increase in the risk premium leads to substantial output contraction and negative welfare ef- fects. Next, we quantify the effects of reducing the debt-to-GDP ratio using a wide range of fiscal austerity measures. These reforms result in trade-offs between short-run contractions and long-run expansions in aggregate output. In addition, the spending-based austerity reform is dominated by the tax-based reform in terms of income in the short run, but be- comes dominant in the long run. The welfare effects vary significantly across generations, depending on fiscal austerity measures, skills and working sector. The current old and middle age generations experience welfare losses while current young workers and future generations are beneficiaries of the reforms. A mixed reform results in the largest welfare effects.en_US
dc.description.urihttps://ideas.repec.org/p/tow/wpaper/2013-01.htmlen_US
dc.formatapplication/pdf
dc.format.extent42 pagesen_US
dc.genreworking papersen_US
dc.identifierdoi:10.13016/M2513TZ81
dc.identifier.citationGerhard Glomm & Juergen Jung & Chung Tran, 2013. "Fiscal Austerity Measures: Spending Cuts vs. Tax Increases," Working Papers 2013-01, Towson University, Department of Economics, revised Aug 2013.en_US
dc.identifier.otherJEL: E21
dc.identifier.otherJEL: E63
dc.identifier.otherJEL: H55
dc.identifier.otherJEL: J26
dc.identifier.otherJEL: J45
dc.identifier.urihttp://hdl.handle.net/11603/10754
dc.language.isoen_USen_US
dc.publisherTowson University. Department of Economicsen_US
dc.relation.isAvailableAtTowson University
dc.relation.ispartofseriesTowson University Department of Economics Working Paper Series;2013-01
dc.subjectFiscal consolidationen_US
dc.subjectWelfareen_US
dc.subjectDistributional effectsen_US
dc.subjectOverlapping generationsen_US
dc.subjectDynamic general equilibriumen_US
dc.subjectEquilibrium (Economics)en_US
dc.titleFiscal austerity measures: spending cuts vs. tax increasesen_US
dc.typeTexten_US

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