This paper characterizes the dynamic effects of shocks in government spending and taxes on U. S. activity in the postwar period. It does so by using a mixed structural VAR/event study approach. Identi cation is achieved by using institutional information about the tax and transfer systems to identify the automatic response of taxes and spending to activity, and, by implication, to infer scal shocks. The results consistently show positive government spending shocks as having a positive effect on output, and positive tax shocks as having a negative effect. One result has a distinctly nonstandard avor: both increases in taxes and increases in government spending have a strong negative effect on investment spending.

This paper investigates the relationship between income distribution, democratic institutions, and growth. It does so by addressing three main issues: the properties and reliability of the income distribution data, the robustness of the reduced form relationships between income distribution and growth estimated so far, and the specific channels through which income distribution affects growth. The main conclusion in this regard is that there is strong empirical support for two types of explanations, linking income distribution to sociopolitical instability and to the education/fertility decision. A third channel, based on the interplay of borrowing constraints and investment in human capital, also seems to receive some support by the data, although it is probably the hardest to test with the existing data. By contrast, there appears to be less empirical support for explanations based on the effects of income distribution on fiscal policy.

CEPS Working Documents are published to give an indication of the work within CEPS' various research programmes and to stimulate reactions from other experts in the field.Unless otherwise indicated, the views expressed are attributable only to the author in a personal capacity and not to any institution with which he is associated. Abstract This paper studies the effects of fiscal policy on GDP, prices and interest rates in 5 OECD countries, using a structural Vector Autoregression approach. Its main results can be summarized as follows: 1) The estimated effects of fiscal policy on GDP tend to be small: positive government spending multipliers larger than 1 tend to be the exception; 2) The effects of fiscal policy on GDP and its components have become substantially weaker over time; 3) Under plausible values of the price elasticity, government spending has positive effects on the price level, although usually small; 4) Government spending shocks have significant effects on the nominal and real short interest rate, but of varying signs; 5) In the post-1980 period, net tax shocks have positive short run effects on the nominal interest rate, and typically negative or zero effects on prices; 6) The US is an outlier in many dimensions; responses to fiscal shocks estimated on US data are often not representative of the average OECD country included in this sample.