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The Evaluation of Fiscal Consolidation Strategies

Author

Listed:
  • Norbert Švarda
  • Jana Valachyová
  • Matúš Senaj
  • Zuzana Siebertová
Abstract
In this paper, we present a framework and perform an assessment of different fiscal consolidation strategies both on the revenue as well as on the expenditure sides of the budget in the context of Slovakia. The model we use for simulations is a behavioural general-equilibrium what_if model. We analyse the simulated impacts of consolidation strategies on growth and on fiscal balance (both in short- and long- term). The microsimulation approach allows us also to evaluate the distributional impacts. In addition, the approach permits to compare the statutory with the resulting tax incidence in the long-run. We simulate strategies based on taxing labour income, taxing consumption as well as cutting expenditures on social transfers. We document that corporate and labour taxes are more unfavourable to output growth, while consumption taxes belong to less damaging instruments for consolidation. We show that spending cuts may promote employment and are not detrimental to output growth.

Suggested Citation

  • Norbert Švarda & Jana Valachyová & Matúš Senaj & Zuzana Siebertová, 2018. "The Evaluation of Fiscal Consolidation Strategies," Discussion Papers 51, Central European Labour Studies Institute (CELSI).
    • Handle: RePEc:cel:dpaper:51
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    References listed on IDEAS

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    1. Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2018. "The Evaluation of Fiscal Consolidation Strategies," International Journal of Microsimulation, International Microsimulation Association, vol. 11(3), pages 39-58.
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    6. Michal Horvath & Matus Senaj & Zuzana Siebertova & Norbert Svarda, 2015. "The End of the Flat Tax Experiment in Slovakia," Discussion Papers 15/12, Department of Economics, University of York.
    7. Decoster, André & Ochmann, Richard & Spiritus, Kevin, 2014. "Integrating VAT into EUROMOD. Documentation and results for Belgium," EUROMOD Working Papers EM12/14, EUROMOD at the Institute for Social and Economic Research.
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    9. Nico Pestel & Eric Sommer, 2017. "Shifting Taxes from Labor to Consumption: More Employment and more Inequality?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(3), pages 542-563, September.
    10. Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2016. "Labour force participation elasticities and the move away from a flat tax: the case of Slovakia," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-26, December.
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    16. Alexis Anagnostopoulos & Orhan Erem Atesagaoglu & Eva Carceles-Poveda, 2014. "On the Double Taxation of Corporate Profits," Department of Economics Working Papers 14-03, Stony Brook University, Department of Economics.
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    19. Boris Cournède & Antoine Goujard & Álvaro Pina, 2013. "How to Achieve Growth- and Equity-friendly Fiscal Consolidation?: A Proposed Methodology for Instrument Choice with an Illustrative Application to OECD Countries," OECD Economics Department Working Papers 1088, OECD Publishing.
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    1. Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2018. "The Evaluation of Fiscal Consolidation Strategies," International Journal of Microsimulation, International Microsimulation Association, vol. 11(3), pages 39-58.
    2. Michal Horváth & Zuzana Siebertová, 2019. "Employment Effects of Income Tax Reforms: Lessons from Slovakia," Discussion Papers 54, Central European Labour Studies Institute (CELSI).

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    More about this item

    Keywords

    MICROSIMULATION; GENERAL EQUILIBRIUM; TAX AND TRANSFER SYSTEM; GOVERNMENT POLICY;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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