Arbeitspapier
Saving Europe? The unpleasant arithmetic of fiscal austerity in integrated economies
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 shocks in a two-country model with endogenous utilization that captures those externalities and matches the capital-tax-base elasticity. Quantitative results show that unilateral capital tax hikes cannot restore fiscal solvency in Europe, and have large negative (positive) effects at "home" ("abroad"). Restoring solvency via either Nash competition or Cooperation reduces (increases) capital (labor) taxes significantly, and leaves countries with larger debt shocks preferring autarky.
- Sprache
-
Englisch
- Erschienen in
-
Series: SAFE Working Paper ; No. 80
- Klassifikation
-
Wirtschaft
Policy Objectives; Policy Designs and Consistency; Policy Coordination
Fiscal Policy
General Outlook and Conditions
International Lending and Debt Problems
International Policy Coordination and Transmission
Economic Impacts of Globalization: Macroeconomic Impacts
- Thema
-
European debt crisis
capacity utilization
fiscal austerity
tax competition
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Mendoza, Enrique G.
Tesar, Linda L.
Zhang, Jing
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
- (wo)
-
Frankfurt a. M.
- (wann)
-
2014
- Handle
- URN
-
urn:nbn:de:hebis:30:3-361397
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Mendoza, Enrique G.
- Tesar, Linda L.
- Zhang, Jing
- Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
Entstanden
- 2014
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