Taxes and Delegation Rather than Fines

29 Pages Posted: 28 Jan 2005

See all articles by Assar Lindbeck

Assar Lindbeck

; CESifo (Center for Economic Studies and Ifo Institute); Research Institute of Industrial Economics (IFN)

Dirk Niepelt

University of Bern - Department of Economics

Date Written: January 2005

Abstract

We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an "economic-theory" perspective on optimal corrective measures with the "legalistic" perspective adopted in the SGP. We discuss the advantages of replacing the Pact's rigid rules backed by fines with corrective taxes (as far as spillover effects are concerned) procedural rules and limited delegation of fiscal powers (as far as domestic policy failures are concerned). This would not only enhance the efficiency of the Pact, but also render it easier to enforce.

Keywords: Stability and Growth Pact, spillover effects, policy failures, Pigouvian taxes, policy delegation

JEL Classification: E63, F33, F42, H60

Suggested Citation

Lindbeck, Assar and Niepelt, Dirk, Taxes and Delegation Rather than Fines (January 2005). CESifo Working Paper Series No. 1389. Available at SSRN: https://ssrn.com/abstract=655824

Assar Lindbeck (Contact Author)

( email )

Stockholm, SE-10691
Sweden
+46 8 163 078 (Phone)
+46 8 162 946 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/assarl

Dirk Niepelt

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

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