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| Author: | Ploeg, F. van der |
| Title: | Rolling back the public sector: differential effects on employment, investment, and growth |
| Journal: | Oxford Economic Papers
2006 : JAN, VOL. 58:1, p. 103-122 |
| Index terms: | employment growth investment macroeconomics public sector welfare |
| Language: | eng |
| Abstract: | The macroeconomic efforts of different ways of rolling back the welfare state are analysed. Cutting public spending on market goods induces a lower interest rate, a higher wage, a lower capital stock, and a fall in employment. Cutting public employment or the labour income tax rate leads, in contrast, leads to a lower wage, a higher interest rate and a higher capital stock. Employment rises on impact. If the extra revenues of rolling back the welfare state are handed back via a lower tax rate rather than a lump-sum subsidy, both cutting public employment and cutting public spending on market goods induce an investment boom. |
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