Fiscal Policy, Profits, and Investment

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Fiscal Policy, Profits, and Investment

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Title: Fiscal Policy, Profits, and Investment
Author: Schiantarelli, Fabio; Perotti, Roberto; Ardagna, Silvia; Alesina, Alberto

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Citation: Alesina, Alberto, Silvia Ardagna, Roberto Perotti, and Fabio Schiantarelli. 2002. Fiscal policy, profits, and investment. American Economic Review 92(3): 571-589.
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Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. We find a sizeable negative effect of public spending--and in particular of its wage component--on profits and on business investment. This result is consistent with different theoretical models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than those of taxes. Our results can explain the so-called "non-Keynesian" (i.e., expansionary) effects of fiscal adjustments.
Published Version: doi:10.1257/00028280260136255
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4685103

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  • FAS Scholarly Articles [6948]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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