Wages,productivity, and retirement

Pensions, both state provided and privately provided, affect incentives to retire. But private pensions are part of the long term compensation package, and altering pensions not only affects retirement incentives, but also wages. A key factor in determining whether retirement occurs at the appropriate age is the relation of productivity to alternatives. When wages, coupled with public and private pension accrual, deviate from worker productivity, private retirement incentives are distorted. Sometimes this results in too much early retirement, creating fiscal difficulties. Sometimes, it results in a desire for delayed retirement, which argues for mandatory retirement rules. Pay compression, where wages do not vary across individuals as much as productivity, exacerbate distortions. Defined benefit pension plans tend to create incentives to retire after a certain number of years of work. Defined contribution plans do not have this feature. Public plans should be designed noting their interaction with incentives that are already inherent in the private wage and pension schemes.     

Panel Data Evidence on the Effects of Fiscal Policy Shocks in the EU New Member States

We identify fiscal policy shocks in the EU new member states using four different methods. We use panel data techniques to estimate the output response to these shocks. We find that investment and export growth increase after fiscal consolidation and decelerate after fiscal stimulus when the shocks are expenditure‐based. In contrast, private consumption does not respond to fiscal policy shocks. Expenditure‐based fiscal consolidations reduce wages, supporting the view that fiscal consolidation of such composition enhances the competitiveness and profitability of domestic enterprises. In contrast, we do not find evidence of fiscal shocks affecting households' confidence.     

FISCAL DEFICITS AND MACROECONOMIC PERFORMANCE IN DEVELOPING COUNTRIES

Although fiscal adjustment was urged on developing countriesduring the 1980s to lead them out of economic malaise, considerableuncertainty remains about the relations between fiscal policyand macroeconomic performance. To illustrate how financial markets,private spending, and the external sector react to fiscal policies,the behavior of holdings of money and public debt, private consumptionand investment, the trade balance, and the real exchange rateis modeled for a sample of ten developing countries. The studiesfind strong evidence that over the medium term, money financingof the deficit leads to higher inflation, while debt financingleads to higher real interest rates or increased repressionof financial markets, with the fiscal gains coming at increasinglyunfavorable terms. Consumers respond differently to conventionaltaxes, unconventional taxes (through inflation or interest andcredit controls), and debt financing, in ways that make fiscaladjustment the most effective means of increasing national saving.Private investment—but not private consumption—issensitive to the real interest rate, which rises under domesticborrowing to finance the deficit. Contrary to the popular presumption,in some countries private investment increases when public investmentdecreases. There is strong evidence that fiscal deficits spillover into external deficits, leading to appreciation of thereal exchange rate. Fiscal deficits and growth are self-reinforcing:good fiscal management preserves access to foreign lending andavoids the crowding out of private investment, while growthstabilizes the budget and improves the fiscal position. Thevirtuous circle of growth and good fiscal management is oneof the strongest arguments for a policy of low and stable fiscaldeficits.      

Wage Differentials and Moonlighting by Civil Servants: Evidence from Cote d'Ivoire and Peru

As part of their efforts to reduce fiscal deficits, many governmentshave allowed public sector salaries to erode, often on the assumptionthat government workers are overpaid vis-à-vis thosein the private sector. We test that assumption by analyzingpublic-private pay differentials in Côte d'Ivoire andPeru. Switching regressions models are estimated using fullinformation maximum likelihood (FIML), and the results are comparedto those obtained using ordinary least squares (OLS) techniques.The OLS yields seriously biased estimates of the pay structure,suggesting that public wages are higher than private wages;the FIML estimates show the opposite. Our probit analysis alsoshows that the wage disadvantage of civil servants is a determinantof the greater prevalence of moonlighting among public thanprivate employees. The evidence suggests that reductions inemployment rather than pay, while being less palatable in theshort term, will be more effective in the long run.     

Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts

This article documents the main stylized features of macroeconomicfluctuations for 12 developing countries. It presents cross-correlationsbetween domestic industrial output and a large group of macroeconomicvariables, including fiscal variables, wages, inflation, money,credit, trade, and exchange rates. Also analyzed are the effectsof economic conditions in industrial countries on output fluctuationsin the sample developing countries. The results point to manysimilarities between macroeconomic fluctuations in developingand industrial countries (procyclical real wages, countercyclicalvariation in government expenditures) and some important differences(countercyclical variation in the velocity of monetary aggregates).Their robustness is examined using different detrending procedures.     

Unemployment and the business cycle

This paper presents a dynamic general equilibrium model where labor effort is imperfectly observable and there is unemployment in equilibrium. In contrast to shirking models in the efficiency wage literature, detected shirkers are not dismissed. Instead, they face a monetary punishment because they forgo an increase in their compensation. Estimated versions of the model can generate the high variation in employment and low variation of real wages observed over the business cycle, and are consistent with existing qualitative evidence about the responses of the economy to fiscal policy shocks.     

Sovereign risk,public debt,dollarization, and the output effects of fiscal austerity

The goal of this paper is to investigate effects of fiscal policy on output as a response to an external shock at different levels and currency compositions of public debt. Central to our analysis is the mutual relationship between sovereign risk and public debt on the one hand, and the linkage between sovereign risk and private credit spreads on the other. We show that fiscal austerity is conducive to real economic activity when initial government debt is high, its foreign currency share is important, and the link between sovereign and corporate spreads is strong.     

Signals from the government: Policy disagreement and the transmission of fiscal shocks

We investigate the effects of fiscal policy communication on the propagation of government spending shocks. To this aim, we propose a new index measuring the coordination effects of policy communication on private agents׳ expectations. This index is based on the disagreement amongst US professional forecasters about future government spending. The underlying intuition is that a clear fiscal policy communication can coalesce expectations, reducing disagreement. Results indicate that, in times of low disagreement, the output response to fiscal spending innovations is positive and large, mainly due to private investment response. Conversely, periods of elevated disagreement are characterised by muted output response.     

Austerity and Private Debt

This study provides empirical evidence that the costs of austerity crucially depend on the level of private indebtedness. In particular, fiscal consolidations lead to severe contractions when implemented in high private‐debt states. Contrary, fiscal consolidations have no significant effect on economic activity when private debt is low. These results are robust to alternative definitions of private‐debt overhang, the composition of fiscal consolidations, and controlling for the state of the business cycle and government debt overhang. I show that deterioration in household balance sheets is important to understand private debt‐dependent effects of austerity.     

Walking up the Down Escalator: Public Investment and Fiscal Stability

When growth-promoting spending is cut so much that the presentvalue of future government revenues falls by more than the immediateimprovement in the cash deficit, fiscal adjustment becomes likewalking up the down escalator. Although short-term cash flowsmatter, too tight a focus on them encourages governments toinvest too little. Cash-flow targets also encourage governmentsto shift investment spending off budget by seeking private investmentin public projects, irrespective of its real fiscal or economicbenefits. To deal with this problem, some observers have suggestedexcluding certain investments (such as those undertaken by publicenterprises deemed commercial or financed by multilaterals)from cash-flow targets. These stopgap remedies may help protectsome investments, but they do not provide a satisfactory solutionto the underlying problem. Governments can more effectivelyreduce the biases created by the focus on short-term cash flowsby developing indicators of the long-term fiscal effects oftheir decisions, including accounting and economic measuresof net worth, and, where appropriate, including such measuresin fiscal targets or even fiscal rules. JEL codes: O23, E62, H60, H54     

Taxing multi-nationals under union wage bargaining

This paper investigates corporate taxation under separate accounting (SA) and formula apportionment (FA) in a model with union wage bargaining and multi-national firms. Under SA, we find that increases in the corporate tax rate raise the wage level of domestic workers, while they lower the remuneration of foreign workers. The main insight emerging from a tax competition game is that the endogenous wage level gives rise to an ambiguous fiscal externality, which may dampen the race-to-the-bottom in corporate tax rates. A switch to a tax system with FA principles reverses the impact of corporate taxes on negotiated wages. While increases in the corporate tax rate reduce domestic wages, they raise the wage level of foreign workers. In a tax competition game, the endogenous wage level gives rise to a positive fiscal externality that enforces the race-to-the-bottom in corporate tax rates.     

Public sector layoffs, severance pay, and inflation in the small open economy

Because severance pay is worth 2–5 years of wages in many LDCs, public sector layoffs increase the fiscal deficit in the short run. Nevertheless, generous severance pay is not as serious a macroeconomic problem as generally thought. In the case where the fiscal deficit is financed by printing money, inflation is continuously lower under plausible conditions. When the government can borrow in world capital markets and layoffs reduce the present-value wage bill, there exists a sequence of bond sales and subsequent redemptions that guarantees continuously lower inflation. This result does not hold, however, if the reform lacks credibility.     

中国财政政策乘数效应分析

财政政策是逆周期宏观调控的重要举措,财政政策乘数高低体现了宏观政策的效果,对政府决策具有重要的参考价值.本文基于IS-LM的拓展模型,估计得到2002-2017年间的财政支出乘数在0.58到0.67之间,税收乘数在-0.22到-0.18之间,私人投资乘数在1.16到1.8之间,财政支出乘数较以往研究有较大的下降,沿用传统的刺激需求政策不可持续.通过对财政支出乘数传导机制的进一步研究发现,财政支出对居民消费的拉动作用在一定程度上被政府投资对消费的挤出效应所抵消,政府投资对私人投资的带动效应也受到财政支出挤出效应的抵消,宽松货币政策的配合可以减少财政支出挤出效应.最后基于分析给出相关政策建议.     

Fiscal Requirements for Dynamic and Real Determinacies in Economies with Private Provision of Liquidity: A Monetarist Assessment

We study the impact of fiscal policies on the inherent links between inflation, unemployment, and asset prices in an environment where firms provide liquidity and the central bank follows a constant money growth rate rule. Firms, other than hiring workers, also supply private assets that are not only useful as a store of value but also as collateral. When firms are not taxed and public debt is scarce, the economy is non-Ricardian so that real indeterminacies can be observed. Moreover, labor market characteristics do not affect the demand for government liabilities. However, when agents face public and private asset scarcity, labor market conditions then impact asset prices and inflation. We further show that irrespective of the type of asset scarcity agents face, when firms are taxed non-ad valorem, not only the level of tax revenues but also its composition matter for real allocations. Moreover, we show that labor market conditions directly affect the dynamics of all government liabilities and inflation.     

Identifying Discretionary Fiscal Policy Reactions with Real‐Time Data

We propose a method of identifying discretionary fiscal policy reactions using real‐time data. Automatic stabilizers should depend on true GDP, while discretionary fiscal policy is contingent on the information that policy makers have in real time. We can compute a real‐time measurement error by comparing the first release of GDP data with later revisions. Discretionary fiscal policy is influenced by this measurement error, whereas automatic fiscal policy is not. We use this identification approach to test the central identifying assumption of Blanchard and Perotti’s (2002) seminal structural vector autoregression (VAR). According to this assumption, fiscal policy makers do not react to GDP developments contemporaneously in a discretionary fashion. We find that government expenditure is adjusted upward if GDP growth in real time is lower than true GDP. This suggests that fiscal policy makers use short‐term funds to buy goods and services in response to their perception of GDP dynamics.     

对个人住房开征物业税的几个判断及效应预测

对个人住房开征物业税是关乎国计民生的大事。本文认为,开征物业税之前需要进一步理顺中央与地方的财政关系;开征后的物业税收入要用于满足地方公共财政支出的需要;物业税开征后的征管质量取决于对个人住房信息的掌握和政府各部门间的横向合作。物业税开征与地区房地产价格弱相关,与全国房地产价格无关;与股市题材炒作相关,与资本市场发育无关;与当地居民收入和福利相关,与辖区外居民效用无关。     

新农保基金筹集主体筹资能力分析

新农保基金由个人缴费、集体补助、政府补贴构成,其中政府补贴包括中央财政补贴和地方财政补贴。目前,对新农保基金筹集主体来说,筹资最困难的便是地方财政,尤其是中西部贫困地区的地方财政。为了确保新农保基金的顺利筹集,应加大新农保的宣传力度;重构中央政府与地方政府之间的财政关系;合理划分地方各级财政之间的责任;加强政策执行力,落实好各级财政补助资金。     

Federal fiscal transfers in monetary unions: A NOEM approach

In the debate over EMU, a widely accepted view is that a federal fiscal mechanism is needed for the participating states to cope with asymmetric shocks. In this paper, we explore the properties of federal fiscal transfer schemes with regard to their capability to stabilize national consumption, production and employment. We consider direct transfers among private sectors and indirect transfers among national fiscal authorities. We show that federal fiscal arrangements can provide perfect insurance. Our analysis builds on the New Open Economy Macroeconomics framework which allows us to portray the transmission of shocks and the properties of transfers in detail. JEL Code E42 · E63 · F33 · F42     

Government deficits and aggregate demand

The evidence presented in this paper indicates that changes in government spending, transfers and taxes can have substantial effects on aggregate demand. The estimates also indicate that the promise of future social security benefits significantly reduces private saving. Each the basic implications of the so-called ‘Ricardian equivalence theorem’ is contradicted by the data. The results are consistent with the more general view of the effects of fiscal actions and fiscal expectations that is described in the paper.