TY  - JOUR
AU  - Alesina,Alberto
AU  - Ardagna,Silvia
AU  - Perotti,Roberto
AU  - Schiantarelli,Fabio
TI  - Fiscal Policy, Profits, and Investment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7207
PY  - 1999
Y2  - July 1999
UR  - http://www.nber.org/papers/w7207
L1  - http://www.nber.org/papers/w7207.pdf
N1  - Author contact info:
Alberto F. Alesina
Department of Economics
Harvard University
Littauer Center 210
Cambridge, MA 02138
Tel: 617/495-8388
Fax: 617/495-7730
E-Mail: aalesina@harvard.edu

Silvia Ardagna
Senior Economist
BofA Merrill Lynch
2 King Edward Street
London EC1A 1HQ
Tel: +44 20 79961512
E-Mail: silvia.ardagna@baml.com

Roberto Perotti
IGIER Universita' Bocconi
Via Roentgen 1
20136 Milano
ITALY
Tel: 39 02 58363073
Fax: 39 02 58363302
E-Mail: roberto.perotti@unibocconi.it

Fabio Schiantarelli
Department of Economics
Boston College
140 Commonwealth Avenue
Chestnut Hill, MA 02467
Tel: 617-5524512
Fax: 617-5522308
E-Mail: schianta@bc.edu
AB  - This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries.  In particular, we investigate how different types of fiscal policy affect profits and , as a result, investment. We find a sizable negative effect of public spending -- and in particular of its public wage component -- on business investment.  This result is consistent with models in which government employment creates wage pressure for the private sector.  Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than the effect of taxes.  Our results have important implications for the so called 'Non-Keynesian' (i.e. expansionary) effects of fiscal adjustments.
ER  -