Based on Austria's fiscal stance in 1995, we compute the generational accounts for currently living as well as future generations. The results reveal the existence of an intergenerational imbalance in favor of currently living generations. Total public sector liabilities may be more than five times as high as the officially recorded level of public debt. Without any action, future generations would face life-time net taxes that are about 65 percent higher than the tax burden of a current newborn. If the government could fully and permanently retain the expenditure cutting and revenue raising effects of the 1996 fiscal consolidation package and the 1997 pension reform, then it might be able to significantly reduce the intergenerational liabilities. However, enacting both the recent tax reform 2000 and the reform of the family support scheme would increase again the fiscal imbalance and intergenerational bias of fiscal policy in Austria.
We present a multi-sector CGE model featuring forward looking investment and savings behavior within an intertemporal optimization framework. Thus, the model captures several of the intertemporal effects of commercial policy that have been stressed by recent literature on current account adjustment. We argue that pursuing a simulation approach in addressing these issues is warranted by certain limitations and ambiguities of the analytical literature. In addition to presenting the details of the model structure, the paper addresses calibration issues relating to intertemporal parameters. The model is calibrated to a microconsistent data set for the Austrian economy. Finally, the paper features an application of the model to a simple tariff liberalization scenario.
Economists have long argued that dynamic effects of policy changes are much more important in the real world than static effects, but this is not reflected in the majority of applied trade studies. This book departs from mainstream trade modeling and examines the dynamic aspects of international trade and investment policy by explicitly specifying dynamic mechanisms in a wide range of modeling approaches.
For present member countries, eastern EU enlargement entails gains from integration as well as fiscal costs. The authors use a calibrated model to quantify the dynamic effects of discriminatory trade liberalization and immigration from eastern applicants. It is found that enlargement is expansionary and yields a remarkable fiscal dividend. Surprisingly, integration compresses the wage spread between skilled and unskilled labor. Overall, the (dynamic) gains from integration clearly outweigh the fiscal cost. While ambiguous a priori, enlargement is found to hold a remarkable net welfare gain for Austria.
This volume offers an up-to-date treatment of dynamic general equilibrium modeling. The book, written by some of the most experienced researchers in the field, contains a rich array of policy settings. The issues considered include trends in the policy use of dynamic general equilibrium models, environmental policy, trade liberalization and enlargement of the European Union, the impact of education and tax policy on human capital accumulation, tax policy and the labor market, and public finances in relation to population ageing.
Academics (especially applied economists specialized in general equilibrium modeling), civil servants and students of economics will find this a useful tool.
