In this paper we study the taxes vs. debt choice for public funding when spending is in large part predictable due to entitlement programs, but the necessary fiscal corrections may not be instantly and indefinitely elastic as usually assumed. We study fiscal behavior in a large sample of countries to determine what fiscal regimes have been used in practice, and what they reveal about the trade-off between raising taxes vs. issuing debt. Unsurprisingly, we find that fiscal discipline and the aims of fiscal rules have varied over the past 50 years. Discipline has generally weakened and there has been a greater tendency to use debt. But governments are no less forward looking than they were. Perhaps more surprising, the high debt countries were more disciplined than low debt economiesbut with worse outcomes because of their poor starting positions and more persistent public spending. The low debt countries have exploited their stronger initial position to allow less discipline; a resting on one's laurels approach

Cerniglia, F., Dia, E., Hughes Hallett, A. (2019). Tax vs. Debt Management Under Entitlement Spending: a Multicountry Study. OPEN ECONOMIES REVIEW, 30(3), 425-443 [10.1007/s11079-018-9517-9].

Tax vs. Debt Management Under Entitlement Spending: a Multicountry Study

Cerniglia, F
;
Dia, E
Membro del Collaboration Group
;
2019

Abstract

In this paper we study the taxes vs. debt choice for public funding when spending is in large part predictable due to entitlement programs, but the necessary fiscal corrections may not be instantly and indefinitely elastic as usually assumed. We study fiscal behavior in a large sample of countries to determine what fiscal regimes have been used in practice, and what they reveal about the trade-off between raising taxes vs. issuing debt. Unsurprisingly, we find that fiscal discipline and the aims of fiscal rules have varied over the past 50 years. Discipline has generally weakened and there has been a greater tendency to use debt. But governments are no less forward looking than they were. Perhaps more surprising, the high debt countries were more disciplined than low debt economiesbut with worse outcomes because of their poor starting positions and more persistent public spending. The low debt countries have exploited their stronger initial position to allow less discipline; a resting on one's laurels approach
Articolo in rivista - Articolo scientifico
Sustainable public debt, Fiscal targets, Tax smoothing
English
9-nov-2018
2019
30
3
425
443
open
Cerniglia, F., Dia, E., Hughes Hallett, A. (2019). Tax vs. Debt Management Under Entitlement Spending: a Multicountry Study. OPEN ECONOMIES REVIEW, 30(3), 425-443 [10.1007/s11079-018-9517-9].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/210424
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