title: Fiscal Policy and Economic Activity
title: Fiskalpolitik und ökonomische Aktivität
Creators: name: Uhl, Matthias
Publisher: name: Philipps-Universität Marburg
Year: 2015
Subjects: Macroeconomics
Fiscal Policy
Fiskalpolitik
Stabilitätspolitik
Wirtschaft
Makroökonomie

description: Die vorliegende Dissertation
      untersucht mittels ökonometrischer Verfahren den Zusammenhang
      zwischen Ausgaben und Einnahmen des Staates und dem Niveau
      der ökonomischen Tätigkeit. Die Ergebnisse legen nahe, dass
      Steueränderungen in Deutschland einen signifikanten Einfluss
      auf die Wirtschaftsleistung haben können. Der
      fiskalpolitische Schock wird tendenziell mehr über Konsum-
      als über Arbeitsangebotsreaktionen übertragen.
description: Conventionally, macroeconomic
      consequences of economic policy have been researched in
      structural vector autoregressions (SVAR). Fiscal policy SVAR
      models estimated for the U.S. are usually supportive for
      large fiscal policy effects on output. In one prominent
      example, the tax multiplier is estimated as -1.33, and the
      spending multiplier as 1.29 (Blanchard and Perotti, 2002).
      SVAR models require untestable identification assumptions;
      thus, prompting the search for natural experiments as an
      alternative source of identification. In a particularly
      influential study, Romer and Romer (2010) construct a
      historical account of exogenous legislated U.S. tax changes
      and estimate a much larger tax multiplier of around -3.
      Applications of the SVAR methodology to Germany have
      generally found rather small effects of fiscal policy on
      output. In Hayo and Uhl (2014a), we use a natural experiment
      approach, closely following Romer and Romer (2010), and find
      strong effects of tax changes on output. Based on our
      evidence, one can conjecture that the tax multiplier in
      Germany might be as large as -2.4. The estimated tax
      multipliers are much larger than alternative estimates
      derived in fiscal policy VAR models for Germany. Implementing
      this study required intensive data collection processes; Uhl
      (2013) contains the documentation of these efforts. Most
      studies on the macroeconomic consequences of fiscal policy
      use aggregate nationwide data. In Hayo and Uhl (2014b), we
      estimate the consequences of federal tax policy actions for
      regional economic activity in the U.S. We find considerable
      variation in how regional output reacts to federal tax
      changes and that estimated state multipliers range between
      –0.2 in Utah and –3.7 in Hawaii. An econometric analysis of
      determinants behind these differences reveals that the size
      and composition of a state tax base is related to the
      strength of the local income reaction. These results improve
      our understanding of the precise transmission mechanism of
      fiscal policy shocks. In Uhl (2014), I estimate the
      consequences of U.S. state-level fiscal policies for local
      economic activity and conclude that state-level spending
      multipliers are relatively small, while tax multipliers are
      large. These results allow for assessing the consequences of
      subnational fiscal policies and provide stylized-facts on
      fiscal multipliers in a monetary union. It is interesting to
      note that estimated multipliers at the state level are
      comparable to estimates derived at the country level despite
      their different transmission mechanism. I also find that both
      increases in state spending and in state taxes improve
      out-of-state output which suggests that spillovers among
      states or countries are relevant. Inference on ‘fiscal
      multipliers’ in aggregate time series requires untestable
      identification assumptions. Asking economic agents directly
      about their responses to fiscal policy is an appealing
      non-standard alternative. Shapiro and Slemrod (1995), and
      follow-up papers, ask U.S. residents about their consumption
      responses to various tax changes. We extend on this research
      by directly asking the German population about their
      consumption and labor supply responses to a recent 2013
      payroll tax change using a representative population survey
      (Hayo et al., 2014, Hayo and Uhl, 2014c, and Hayo and Uhl,
      2014d). About 55 per cent of the respondents indicate that
      they have increased spending; suggesting that tax changes in
      Germany have a relatively large impact on consumption and,
      hence, on economic activity. Based on the evidence from this
      representative survey, the effects of tax changes on labor
      supply, however, are likely small. The relative dominance of
      consumption responses, vis-à-vis labor supply responses, is a
      conclusion that is also present in the aggregate time series
      evidence in Hayo and Uhl (2014a). One further noteworthy
      implication from our representative survey is that currently
      low interest rates reduce incentives to save as well as
      incentives for labor supply.