Spend-and-Tax: A Panel Data Investigation for the EU

Economics Bulletin, Vol. 29, No. 4, pp. 2545-2551, 2009

Posted: 25 Oct 2009

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

Christophe Rault

IZA Institute of Labor Economics; University of Orleans; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: October 12, 2009

Abstract

Using bootstrap panel analysis, allowing for cross-country correlation, without the need of pre-testing for unit roots, we study the causality between government spending and revenue for the EU in the period 1960-2006. We find spend-and-tax causality for Italy, France, Spain, Greece, and Portugal, while tax-and-spend evidence is present for Germany, Belgium, Austria Finland and the UK, and for several EU New Member States. Moreover, in the run-up to EMU there was some shifting away from a spend-and-tax strategy, implying adjustments of fiscal behaviour.

Keywords: panel causality, fiscal policy, EU

JEL Classification: C23, E62, H62.

Suggested Citation

Afonso, António and Rault, Christophe and Rault, Christophe, Spend-and-Tax: A Panel Data Investigation for the EU (October 12, 2009). Economics Bulletin, Vol. 29, No. 4, pp. 2545-2551, 2009, Available at SSRN: https://ssrn.com/abstract=1492526

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

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HOME PAGE: http://www.iseg.ulisboa.pt/aquila/homepage/aafonso/research

UECE (Research Unit on Complexity and Economics) ( email )

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ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

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REM - Research in Economics and Mathematics ( email )

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Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

Christophe Rault

University of Orleans ( email )

Rue de Blois
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LEO, Orleans, Orleans cedex 2 45067
France

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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