Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/181468
Authors: 
Obst, Thomas
Onaran, Özlem
Nikolaidi, Maria
Year of Publication: 
2017
Series/Report no.: 
FMM Working Paper 10
Abstract: 
This paper develops a multi-country post-Kaleckian demand-led growth model that incorporates the role of the government. One novelty of this paper is to integrate crosscountry effects of both changes in income distribution and fiscal policy. The model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand in EU15 countries. The results show that a policy mix that combines the simultaneous implementation of a pro-labour wage policy, an expansionary fiscal policy and a progressive tax policy in all EU countries leads to a significant rise in the EU15 GDP. The impact of wage policies is positive but small; the overall stimulus becomes much stronger with fiscal expansion. This policy mix leads to an improvement in the budget balance in all the EU15 countries, suggesting that expansionary fiscal policy is sustainable when it is combined with wage and progressive tax policy.
Subjects: 
Wage Share
Growth
European Multiplier
Demand Regime
Fiscal Policy
JEL: 
E12
E22
E25
E62
Document Type: 
Working Paper
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