Tax Base and Crowding‐in Effects of Balanced Budget Fiscal Policy

A dynamic general equilibrium business cycle model is constructed with staggered price adjustment, monopolistic wage setting and distortionary taxation. The government purchases goods, runs an unemployment benefit system and balances its budget through a proportional tax on labour income. A temporary tax‐financed increase in government expenditures can lower the tax rate through a demand‐induced widening of the tax base. It is shown analytically that this allows private consumption to rise, under realistic conditions, despite the negative wealth effect of increased fiscal spending.     

Unemployment,Government Spending and the Laffer Effect*

The paper studies the effects of income tax rate changes in a general equilibrium model with frictional unemployment. Laffer curve effects, by which a tax rate reduction may increase the level of government spending or its share in output, are shown to be possible under certain conditions. These are the presence of unemployment benefit payments, government budget balance through fiscal spending adjustment and limited quantitative importance of labour reallocation costs. Endogenous government spending acts as a fiscal accelerator if the fiscal burden of unemployment benefit payments is large, but reduces the employment effects of tax rate cuts if it is low.     

Iets over de studie van de economische problemen van de ontwikkelingslanden

Openbare les, gegeven bij de aanvaarding van het ambt van buitengewoon lector in de economische problematiek der ontwikkelingslanden aan de Vrije Universiteit te Amsterdam, op 30 oktober 1964.     

Einfluss von HGÜ-Verbindungen auf Markt und Netz

Studies assume that the political subsidization of renewable energies throughout Europe will increase the amount of congestions in the European transmission grid. In current discussions HVDC reinforcement measures are seen as one means to provide further transmission capacities and to ensure a reliable operation of the system. In an effort to contribute to these discussions the publication evaluates the effect of various HVDC reinforcement measures on the grid and the market. The assessment of these reinforcement measures is based on a macroeconomic approach which considers three major cost terms. The first term represents the electricity generation costs. HVDC reinforcement measures influence this cost term as market zones with different generation costs can be coupled and overall generation costs thus might sink. The second cost term is orientated on the necessary redispatch effort to guarantee a secure and reliable operation of the grid. The third cost term represents the investment costs of the HVDC reinforcement measures. The sum of all these cost terms is regarded as a means to compare different reinforcement measures. The study shows that the effect of all examined reinforcement measures on the transmission grid is comparable. Structural congestions in the grid which exist already without any HVDC reinforcement are not influenced significantly by the examined HVDC links. Of all considered reinforcement measures a link from Germany to Norway exhibits the highest influence on the market. This link also offers the highest benefit regarding market and grid as a whole.     

DEBT NONNEUTRALITY,POLICY INTERACTIONS,AND MACROECONOMIC STABILITY*

We study the consequences of nonneutrality of government debt for macroeconomic stabilization policy in a sticky‐price model. Ricardian equivalence fails because debt has a negative impact on its rate of return and on private savings, which is induced by assuming transaction services of bonds. Under aggressive monetary policy regimes, macroeconomic fluctuations tend to be stabilized if nominal budget deficits are low. A smooth debt path limits inflation expectations, such that inflation variances can be reduced. Under a balanced budget policy, the central bank's output gap–inflation volatility trade‐off is improved relative to an environment where debt is neutral.