Gradzewicz, Michal and Jędrzejowicz, Tomasz and Żółkiewski, Zbigniew (2007): The cost of fiscal tightening in Poland on the road to the Euro: does the labour market matter? (CGE model simulations). Published in: Bank i Kredyt , Vol. 2007, No. 4 (April 2007): pp. 3-17.
Download (183kB) | Preview
The paper presents an assessment of macroeconomic and also some selected structural consequences of the proposed fiscal consolidation necessary for Poland to fulfil the Maastricht fiscal criteria. The fiscal adjustments are assessed with a CGE model simulated over the 2006–2008 horizon. Two sets of simulations are analysed, namely rigid vs. flexible wages. It is shown that the fiscal tightening programme analysed in this paper does not necessarily incur any costs in terms of aggregate GDP loss in years 2006–2008. On the contrary, it may generate additional growth effects, provided that downward wage adjustments reduce unit labour costs, thus fostering the growth. It is concluded that the condition for the achievement of a smooth and relatively low-cost fiscal adjustment is to supplement it with labour market reform.
|Item Type:||MPRA Paper|
|Original Title:||The cost of fiscal tightening in Poland on the road to the Euro: does the labour market matter? (CGE model simulations)|
|English Title:||The cost of fiscal tightening in Poland on the road to the Euro: does the labour market matter? (CGE model simulations)|
|Keywords:||fiscal reform, Maastricht criteria, labour market, CGE model|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General
|Depositing User:||Michał Gradzewicz|
|Date Deposited:||14. Jan 2011 21:53|
|Last Modified:||13. Feb 2013 12:59|
Afonso A. (2006), Expansionary Fiscal Consolidations in Europe. New Evidence, “Working Paper”, No. 675, ECB, Frankfurt.
Alesina A., Perotti R. (1996), Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects, “Working Paper”, No. 5730, NBER, Cambridge.
Bassanini A., Rasmussen J.H., Scarpetta S. (1999), The Economic Effects of Employment-Conditional Income Support Schemes for The Low-Paid: An Illustration From a CGE Model Applied to Four OECD Countries, “Working Paper”, No. 224, OECD, Paris.
Boeters S., Gürtzgen N., Schnabel R. (2003), Reforming Social Welfare in Germany – An Applied General Equilibrium Analysis, “Discussion Paper”, No. 03-70, Centre for European Economic Research (ZEW), Mannheim.
Bovenberg A.L., Graafland J.J., de Mooij R.A. (2000), Tax Reform and the Dutch Labour Market: An Applied General Equilibrium Approach, “Journal of Public Economics”, Vol. 78, No. 1–2, p. 193–214.
Burns A., Yoo K.Y. (2002), Public Expenditure Management in Poland, “Working Paper”, No. 346, OECD, Paris. Dervis K., de Melo J, Robinson S. (1982), General equilibrium models for development policy, Cambridge University Press, New York
Dewatripont M., Michel G. (1987), On Closure Rules, Homogeneity and Dynamics in Applied General Equilibrium Models, “Journal of Development Economics”, Vol. 26, p. 65–76. Dixon P.B., Rimmer M.T. (2002), Dynamic, General Equilibrium Modelling for Forecasting and Policy: A Practical Guide and Documentation of MONASH, North-Holland, Amsterdam.
Eurostat (2004), Eurostat decision on deficit and debt. Classification of funded pension schemes in case of government responsibility or guarantee, Luxembourg
Garibaldi P., Mauro P. (2002), Anatomy of Employment Growth, “Economic Policy”, Vol. 17, No. 34, p. 67–113.
Giavazzi F., Japelli T., Pagazzi M. (2000), Searching for Non-linear Effects of Fiscal Policy: Evidence From Industrial and Developing Countries, “Working Paper”, No. 7460, NBER, Cambridge.
Giavazzi F., Pagano M. (1996), Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience, “Swedish Economic Policy Review”, Vol. 3, No. 1, p. 67–103.
Gradzewicz M., Griffin P., Zólkiewski Z. (2006), An Empirical Recursive-Dynamic General Equilibrium Model of Poland’s Economy. Including Simulations of the Labor Market Effects of Key Structural Fiscal Policy Reforms, Document of the World Bank and National Bank of Poland, Warsaw.
Hertel T.W. (1999), Global Trade Analysis: Modelling and Applications, Cambridge University Press, Cambridge.
IMF (2006), Assessing the flexibility of the Polish economy, mimeo, Washington.
Knudsen M.B., Pedersen L.H., Petersen T.W., Stephensen P., Trier P. (1998), Modelling structural reform: A dynamic CGE analysis of the Danish Tax Reform Act of 1993, in: P. van Bergeijk, B. Vollaard, J. van Sinderen (eds.), Structural reform in open economies, Edward Elgar, Cheltenham (UK), Northampton (USA).
Lane P., Perotti R. (2001), The Importance of Composition of Fiscal Policy: Evidence from Different Exchange Rate Regimes, “CEG Working Papers”, No. 200111, Trinity College Dublin, Department of Economics.
Lofgren H., Harris R.L., Robinson S. (2002), A standard computable general equilibrium (CGE) model in GAMS, International Food Policy Research Institute, http://www.ifpri.org/pubs/microcom/micro5.htm
Rada Ministrów RP (2003), Program uporzàdkowania i ograniczenia wydatków publicznych, Warszawa.
Pyatt G., Round J. (eds.), (1985), Social Accounting Matrices: A Basis for Planning, The World Bank, Washington, D.C.
GUS (2005), Rachunki narodowe wedΠug sektorów i podsektorów instytucjonalnych 2000–2003, Warszawa. NBP (2004), Costs and benefits of Poland’s adoption of the Euro, Warsaw.
Roberts B.M., Round J.I., ˚óΠkiewski Z. (1998), Structural Features of Economic Reform in Poland, “Review of Development Economics”, Vol. 2, No. 2, p. 211–230.
Robinson S. (2003), Macro Models and Multipliers: Leontief, Stone, Keynes, and CGE Models, International Food Policy Research Institute, http://www.ifpri.org/events/seminars/2003/20031014/robinson/thorbecke_EPIAM.pdf
Rzońca A., Ciżkowicz P. (2005), Non-Keynesian Effects of Fiscal Contraction in New Member States, “Working Paper”, No. 519, ECB, Frankfurt.
Scarpetta S. (1998), Labour Market Reforms and Unemployment: Lessons from the Experience of the OECD Countries, “Working Paper”, No. 382, Inter-American Development Bank, Washington, D.C.
Commission of the European Communities (2005), The EU Economy: 2005 Review, Brussels.
Thorbecke E. (2000), The use of Social Accounting Matrices in Modelling, “Conference Paper”, 6th General Conference of The International Association for Research in Income and Wealth, 27 August – 2 September 2000, Cracow.
von Hagen J., Hughes H.A., Strauch R. (2001), Budgetary Consolidation in EMU, “European Economy – Economic Papers”, No. 148, European Commission, Brussels.
World Bank (2003), Poland – Toward a fiscal framework for growth – a public expenditure and institutional review, “Economic report”, Washington, D.C.