The (Subjective) Well-Being Cost of Fiscal Policy Shocks

Eklou, Kodjovi; Fall, Mamour

doi:10.5089/9781513525846.001

Cited by 6 publications

(10 citation statements)

References 31 publications

(95 reference statements)

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“…This refers to an increase in happiness by 1%, a decrease in the ratio of nondistortionary taxes to GDP by 13%. This finding is consistent with the results of Grimes et al (2016) and Eklou and Fall (2020) who mentioned that nondistortionary taxes have a negative impact on happiness. Moreover, GMM model results are also consistent with the finding of Ram (2009) that is the nonexistence of evidence in supporting the hypothesis, including the relationship between public expenditures and happiness.…”

Section: Countries Of the Mena Regionsupporting

confidence: 93%

“…They also found that unproductive public spending was associated with higher welfare for middle-class compared to others and transferring part of the spending to the subnational government was linked to higher subjective well-being, but that tax collection through the subnational government was associated with low subjective well-being. As for Eklou and Fall (2020), they investigate the effect of fiscal consolidations on the cost of welfare is by identifying the effect of discretionary spending cuts and tax increases on social welfare. The study covers 13 European countries, including more than half a million individuals during the period from 1980 to 2007.…”

Section: Repsmentioning

confidence: 99%

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The impact of fiscal policy on economic happiness: evidence from the countries of the MENA region

Rizkallah

2021

REPS

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Purpose The purpose of this study is to investigate the relationship between fiscal policy (tax revenues and government expenditure) and economic happiness. The panel data are used from 2012 to 2016 for 18 countries of the Middle East and North Africa (MENA) region. Design/methodology/approach The study adopted the Barro (1990) model of endogeneity growth to characterize the relationship between fiscal policy and economic happiness. The study estimated the model by using the pooled ordinary least squares method, the fixed effects method and the random-effects method. In addition, the study used the dynamic estimate of this relationship rather than the conventional static estimate through the generalized method of moments’ method. This leads to overcoming the endogeneity problem between the dependent variable and the independent variables. Findings The main findings indicated that there is a negative and statistically significant relationship between nondistortionary taxes and economic happiness. Also, there is no relationship between public expenditure and economic happiness, whether productive or nonproductive. The results confirmed a positive and significant relationship between other revenues and economic happiness. The current study recommended the diversification of other public revenue sources to increase its contribution to public expenditure financing and the restructuring of the tax system, particularly nondistortionary taxes. These taxes must be replaced by other revenues or by distortionary taxes to increase economic happiness. Research limitations/implications The research represents a strong starting base that can help researchers to conduct more studies on economic happiness by using different measures and comparing their results to find out the determinants of happiness. The relationship between economic happiness and fiscal policy with its different aspects requires more studies, especially the relationship between taxes and economic happiness in our region. The study of the relationship between public expenditure and economic happiness according to economic activities can guide decision-makers to direct the expenditure toward economic activities that achieve the happiness of their citizens. Enriching this study requires the availability of fiscal data for the entire MENA region for longer periods, which allow us to divide the countries of the region into petroleum and nonpetroleum countries, but the scarcity of data is one of the limitations of the study. Practical implications The governments of MENA countries should diversify other public revenue sources to increase the financing public expenditure by the expense of tax revenues, especially nondistortionary taxes, which would increase the economic happiness of their citizens. Originality/value This study is one of the rare studies that investigate the relationship between fiscal policy and economic happiness at the global level. This study contributed to filling the gap of this issue in the MENA region and enriching global literature through the experience of the MENA region. Moreover, this study investigated all aspects of fiscal policy, in contrast to other studies that focused on one of its aspects. The weakness in these studies is because of the lack of correlation between the sources of revenues and the face of their spending.

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Section: Countries Of the Mena Regionsupporting

confidence: 93%

Section: Repsmentioning

confidence: 99%

The impact of fiscal policy on economic happiness: evidence from the countries of the MENA region

Rizkallah

2021

REPS

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“…Recent literature has reported the ambiguous effect of trade openness on tax revenue (Cagé & Gadenne, 2018), and India's decision to pull out from the Regional Comprehensive Economic Partnership (RCEP) is aptly appropriate (Deb, 2020). Moreover, fiscal consolidation is likely to adversely impact citizens' well-being, mainly when austerity measures are being applied (Eklou & Fall, 2020).…”

Section: Related Literaturementioning

confidence: 99%

Prioritising GDP or Tax Revenues: Indian Economists’ Dilemma

Deb

Baruah

2021

SEDME (Small Enterprises Development, Management & Extensio

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An efficient tax administration with fair tax rates is likely to generate substantial revenues, reducing the fiscal deficit, creating employments, and taming inflation. Indian tax administration has used the power to levitate tax as if it has been taken for granted by adopting the fixed money value target per geographical area instead of any data analytics. The effective tax rate and the average statutory tax rates were the highest in 2017–2018. Focus on generating non-tax revenues by multiple ways and structural reforms for boosting investments and household savings for accelerating GDP should be preferred over maximising tax revenues.

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“…To the extent that an individual's performance at work depends on their well-being and their perception of inequality, fiscal consolidation that affects these variables will have an impact on their productivity. Recent research by Eklou et al (2020) revealed a negative relationship between austerity measures and subjective wellbeing. Implications of fiscal consolidation for inequality have also been studied by Wolff and Zacharias (2007) and Agnello and Sousa (2014).…”

Section: Introductionmentioning

confidence: 99%

Fiscal Consolidation and Firm Level Productivity: Evidence from Advanced Economies

Tuuli¹,

Long²

2022

IMF Working Papers

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We would like to thank Charleen Gust, Linda Kaltani, Gilda Fernandez and the attendees at the Finance Departmental seminar for their valuable suggestions. We also acknowledge the insightful comments from Mr. Moreau, Philippe Wingender, and Diaa Noureldin on the initial draft. The views expressed herein are those of the authors and should not be attributed to the IMF, its Executive Board, or its management.

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The (Subjective) Well-Being Cost of Fiscal Policy Shocks

Cited by 6 publications

References 31 publications

The impact of fiscal policy on economic happiness: evidence from the countries of the MENA region

The impact of fiscal policy on economic happiness: evidence from the countries of the MENA region

Prioritising GDP or Tax Revenues: Indian Economists’ Dilemma

Fiscal Consolidation and Firm Level Productivity: Evidence from Advanced Economies

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