Are taxes too low?

Article Abstract:

Taxes were not necessarily set 'too low' from an optimal taxation perspective during the 1980s. It is demonstrated that seemingly 'low' tax rates are actually optimal when a future stabilization of government spending is anticipated, such that the debt/GDP ratio increases on the optimal path as stabilization is steadily achieved. The expectation of future stabilization results in a nonlinear relationship between tax rates and expenditures like that observed in the data.

National debt, Taxation, Public debts

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Fiscal spending shocks, endogenous government spending, and real business cycles

Article Abstract:

The impact of endogenized government spending decisions is analyzed. A real business cycle model is examined in which government spending has two endogenous components. One of these has a direct impact on private agents' marginal utilities, while the other is comprised of public investment expenditures and influences public capital stock. The results are discussed.

Fiscal policy, Expenditures, Public, Public expenditures

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Factor demand models with nonlinear short-run fluctuations

Article Abstract:

The asymmetric costs of adjustment causing short-term volatility in stochastic factor demand systems are considered. The theoretical model analyzed can produce cyclical asymmetries in the demand for capital and labor between the ups and downs of the business cycle. The presence of these asymmetries is tested using Neftci's (1984) data-based likelihood method.

Supply and demand, Work, Work (Labor), Capital, Economic stabilization

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