The phrase business cycle is usually used for short term fluctuations in macroeconomic time series. In this paper we focus on the estimation of business cycles in a bivariate manner by fitting two series simultaneously. The underlying model is thereby nonparametric in that no functional form is prespecified but smoothness of the functions are assumed. The functions are then estimated using penalized spline estimation. The bivariate approach will allow to compare business cycles, check and compare phase lengths and visualize this in forms of loops in a bivariate way. Moreover, the focus is on separation of long and short phase fluctuation, where only the latter is the classical business cycle while the first is better known as Friedman or Goodwin cycle, respectively. Again, we use nonparametric models and fit the functional shape with penalized splines. For the separation of long and short phase components we employ an Akaike criterion.
The Dutch tax-benefit system and life-cycle employment: Outcomes and reform options An overlapping-generations model with search unemployment is calibrated for the Netherlands to assess the impact of tax-benefit reforms on labour supply. Several reforms are analysed, in particular the introduction of a flat tax and pension reforms. The model demonstrates the potential of these reforms to raise labour supply. In particular, pension reforms, such as lowering replacement rates for pensioners, help to boost participation rates of older workers. On the other hand, a flat tax would promote longer working hours across the board, thereby rising labour supply. However, the introduction of a flat tax is a costly measure and would increase the primary general government deficit by close to 2% of GDP. Simultaneous measures to lower the structural unemployment rate would not only help to avoid adverse effects of such a tax reform on the fiscal balance but would strengthen further the positive effects of a flat tax on working hours.
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