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Long‐Term Effects of Fiscal Policy on the Size and Distribution of the Pie in the UK *
Author(s) -
Ramos Xavier,
RocaSagales Oriol
Publication year - 2008
Publication title -
fiscal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 40
eISSN - 1475-5890
pISSN - 0143-5671
DOI - 10.1111/j.1475-5890.2008.00079.x
Subject(s) - economics , fiscal policy , vector autoregression , term (time) , public spending , inequality , structural vector autoregression , macroeconomics , distribution (mathematics) , public expenditure , monetary economics , econometrics , monetary policy , public finance , politics , physics , mathematics , quantum mechanics , political science , law , mathematical analysis
. This paper provides a joint analysis of the output and distributional long‐term effects of various fiscal policies in the UK, using a vector autoregression (VAR) approach. Our findings suggest that the long‐term impact on GDP of increasing public spending and taxes is negative, and especially strong in the case of current expenditure. We also find significant distributional effects associated with fiscal policies, indicating that an increase in public spending reduces inequality while a rise in indirect taxes increases income inequality.