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Cover -- Title -- Copyright -- CONTENTS -- INTRODUCTION -- CHAPTER ONE: Understanding Taxes -- The Progressive Tax -- The Proportional Tax -- The Regressive Tax -- Which System Is Best? -- The Argument for Lower Taxes -- The Argument for Higher Taxes -- CHAPTER TWO: What is Government Spending? -- Understanding Debt -- Impact on Future Generations -- Advantages -- The Bank Bailouts -- CHAPTER THREE: Budgeting -- Personal Budget Versus the Federal Budget -- CHAPTER FOUR: Fiscal Policy -- Problems with Fiscal Policy -- What Can We Do? -- Fiscal Discipline -- A Challenge -- Using Technology to Keep an Eye on Spending -- CHAPTER FIVE: How You Can Help -- Encourage Voting -- Raise Your Voice -- What You Can Do -- Using Social Media for Change -- GLOSSARY -- FOR MORE INFORMATION -- Web Sites -- FOR FURTHER READING -- INDEX -- About the Authors -- Photo Credits

This paper develops and implements a neoclassical model of fiscal policy. The paper's main empirical hypothesis is that government non‐military investment spending is more expansionary than is either government consumption or military investment. The paper utilizes annual data to support the hypothesis. It finds that output "multipliers" for government non‐military investment significantly exceed unity while multipliers for government consumption and military investment lie below unity. The paper also finds that public sector deficits—both actual and cyclically adjusted—contain minor explanatory power for output when one controls for the effects of non‐military investment.

It is widely believed that globalization, through increased factor mobility, will exert a downward pressure on tax rates and hence on public expenditures. Recent advances in the new economic geography (NEG) literature have, however, shown that such a 'race to the bottom' is not inevitable. Even with perfect factor mobility, a positive tax differential between core and peripheral countries can persist as long as the agglomeration rent, that is associated with being located in the agglomeration, exceeds the tax gap. In these NEG models the relevance of government spending as a determinant of agglomeration is, however, unduly neglected. The focus is on tax rates only and on the stability of core-periphery equilibria. Using a NEG model where the provision of public goods is allowed to influence the location choices of economic agents and starting intially from a spreading instead of a core-periphery equilibrium, we show that governments can affect the spatial equilibrium through their provision of public goods. Our main finding is that the introduction of public goods fosters agglomeration in the sense that it makes the spreading equilibrium unstable.

We study optimal government spending in a business cycle model with frictional unemployment. The Ramsey optimal policy is contrasted with a reference policy which would be first best in a frictionless economy. Results are: the Ramsey policy i) implies a higher steady state ratio of government spending to private consumption than the reference policy; ii) is procyclical under technology shocks and countercyclical under demand shocks (while the public spending ratio to private consumption is always countercyclical); iii) stabilizes employment, in some cases even at the cost of higher consumption volatility; iv) is qualitatively unaltered in a sticky price version with jointly optimal monetary and fiscal policy.

This PhD thesis investigates the role of government spending in the macro-economy. A central problem is that government spending and other macroeconomic variables are simultaneously affected by the same external factors. Moreover, policymakers often react directly to downturns in the economy by increasing spending, creating two-way causality. It is therefore difficult to estimate causal effects of changes in government spending. As a solution, each chapter in this PhD thesis uses econometric techniques to identify the part of government spending that does not react to movements of the economy. The aim is to understand which underlying factors play a role in the way government spending affects the economy. Three factors are analyzed: the length of the anticipation horizon, different categories of spending and sectoral and regional spillover effects.

"Prepared in cooperation with the Municipal Finance Officers Association of the United States and Canada." ; Bibliography: p. 137-142. ; Mode of access: Internet.