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This paper studies the fiscal restructuring of the first half of the 1990s in the major industrial countries. It presents and calibrates a simple model of the labor market and integrates it into a multi-country macroeconomic model that takes into account the effects of distortionary taxes. It then uses the resulting framework to simulate the effects of recent and prospective changes in fiscal policies in the group of seven major industrial countries. The analysis suggests that in the long run the impact on output is likely to be positive in those countries that relied relatively more on expenditure cuts or indirect tax increases (such as Canada, France, Japan, and the United Kingdom), while the effect of the fiscal restructuring on output is estimated to be negative in those countries that relied primarily on labor and capital taxes (Germany, Italy, and the United States).

Macroeconomics --- Public Finance --- Taxation --- Fiscal Policy --- National Deficit Surplus --- Business Taxes and Subsidies --- Macroeconomics: Consumption --- Saving --- Wealth --- National Government Expenditures and Related Policies: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Welfare & benefit systems --- Consumption taxes --- Consumption --- Expenditure --- Labor taxes --- Revenue administration --- Taxes --- National accounts --- Spendings tax --- Economics --- Expenditures, Public --- Income tax --- Revenue --- United States

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This paper examines the effects of taxation of human capital, physical capital and foreign assets in a multi-sector model of endogenous growth. It is shown that in general the growth rate is reduced by taxes on capital and labor (human capital) income. When the government faces no borrowing constraints and is able to commit to a given set of present and future taxes, it is shown that the optimal tax plan involves high taxation of both capital and labor in the short run. This allows the government to accumulate sufficient assets to finance spending without any recourse to distortionary taxation in the long run. When restrictions to government borrowing and lending are imposed, the model implies that human and physical capital should be taxed similarly.

Exports and Imports --- Labor --- Macroeconomics --- Taxation --- Fiscal Policy --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Aggregate Factor Income Distribution --- International Investment --- Long-term Capital Movements --- Labour --- income economics --- International economics --- Welfare & benefit systems --- Public finance & taxation --- Human capital --- Capital income --- Foreign assets --- Labor taxes --- Capital income tax --- Income tax --- Working capital --- Investments, Foreign --- Income economics

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This Selected Issues paper on Hungary presents an empirical analysis of the leading indicators for inflation and models the determinants of inflation. It summarizes current knowledge about the behavior of inflation and thus underpins the subsequent discussion of possible changes to the current nominal anchor framework. The paper analyzes the growth potential and fiscal issues affecting that potential, and the external constraint. The paper suggests that some relatively stable econometric relationships can be found, despite the considerable structural and policy changes that occurred during the 1990s.

Exports and Imports --- Foreign Exchange --- Inflation --- Macroeconomics --- Taxation --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Price Level --- Deflation --- International Lending and Debt Problems --- Macroeconomics: Production --- International economics --- Welfare & benefit systems --- Currency --- Foreign exchange --- Public finance & taxation --- External debt --- Social security contributions --- Labor taxes --- Personal income tax --- Prices --- Taxes --- Income tax --- Debts, External --- Social security --- Hungary

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Hours worked vary widely across countries and over time. In this paper, we investigate the role played by taxation in explaining these differences for EU New Member States. By extending a standard growth model with novel data on consumption and labor taxes, we assess the evolution of trends in hours worked over the 1995-2017 period. We find that the inclusion of tax rates in the model significantly improves the tracking of hours. We also estimate the elasticity of hours (and its different margins) to quantify the deadweight loss introduced by consumption and labor taxes. We find that these taxes explain a large share of labor supply differences across EU New Member States and that the potential gains from policy actions are noteworthy.

Taxation --- Macroeconomics --- Personal Finance -Taxation --- Time Allocation and Labor Supply --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Labor Economics: General --- Business Taxes and Subsidies --- Welfare & benefit systems --- Public finance & taxation --- Labour --- income economics --- Labor taxes --- Labor --- Consumption taxes --- Social security contributions --- Personal income tax --- Taxes --- Income tax --- Labor economics --- Spendings tax --- Social security --- Czech Republic --- Income economics

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The paper studies the dynamic allocation effects of tax policy in the context of an overlapping generations model of the Blanchard-Yaari type. The model is extended to allow for endogenous labor supply and three tax instruments: a capital income tax, labor income tax, and consumption tax. Analytical expressions and simple diagrams are used to discuss the impact, transition, and long-run effects of tax policy changes. It is shown that a part of the long-run incidence of capital and consumption taxes falls on capital when households’ horizons are finite, whereas labor would fully bear the burden of these taxes in an infinite horizon model.

Investments: Stocks --- Labor --- Macroeconomics --- Taxation --- Welfare Economics: General --- Taxation and Subsidies: Externalities --- Redistributive Effects --- Environmental Taxes and Subsidies --- Debt --- Debt Management --- Sovereign Debt --- Macroeconomics: Consumption --- Saving --- Wealth --- Demand and Supply of Labor: General --- Business Taxes and Subsidies --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Labour --- income economics --- Public finance & taxation --- Welfare & benefit systems --- Investment & securities --- Consumption --- Labor supply --- Consumption taxes --- Labor taxes --- Stocks --- Economics --- Labor market --- Spendings tax --- Income tax --- Income economics