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dc.contributor.authorCournède, Boris
dc.contributor.authorGonand, Frédéric
dc.date.accessioned2013-02-21T13:39:59Z
dc.date.available2013-02-21T13:39:59Z
dc.date.issued2006-10
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/11047
dc.language.isoenen
dc.subjectPublic debten
dc.subjectpotential growthen
dc.subjectfiscal consolidationen
dc.subjectageingen
dc.subjectgeneral equilibriumen
dc.subjecteuro areaen
dc.subjectfiscal sustainabilityen
dc.subjectpublic expenditureen
dc.subject.ddc336en
dc.subject.classificationjelD58en
dc.subject.classificationjelE27en
dc.subject.classificationjelE60en
dc.subject.classificationjelH55en
dc.subject.classificationjelH63en
dc.subject.classificationjelJ11en
dc.titleRestoring Fiscal Sustainability in the Euro Area Raise Taxes or Curb Spending?en
dc.title.alternativeRétablir la soutenabilité des finances publiques dans la zone euro : augmenter les impôts ou maîtriser les dépenses?en
dc.typeDocument de travail / Working paper
dc.description.abstractenWith 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.en
dc.publisher.nameOCDEen
dc.publisher.cityParisen
dc.identifier.citationpages39en
dc.relation.ispartofseriestitleOECD Economics Department Working Papersen
dc.relation.ispartofseriesnumber520en
dc.identifier.urlsitehttp://dx.doi.org/10.1787/414711615127en
dc.subject.ddclabelEconomie publiqueen
dc.description.submittednonen


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