Fiscal Policy

Stephie Fried

This paper develops a macro heterogeneous-agent model to quantify the distributional welfare impacts of higher temperatures from climate change across income groups in the United States. The …

Lukasz Rachel

This paper builds a tractable, fully analytical version of the workhorse macro-epidemiology ("econ-epi") model and uses it to characterize how susceptible individuals behave during a deadly epidemic, …

Marc K Chan · Cain Polidano · Ha Vu · Roger Wilkins · Andrew Carter · Hang To

Governments across ten-plus countries — including Australia, the United States, Germany, and New Zealand — have introduced matching schemes to encourage low- and middle-income earners to contribute …

Saki Bigio · Diego R Känzig · Pablo Sánchez · Conor Walsh

This paper quantifies the sources and distributional consequences of unexpected carbon price changes for European households using a money-metric welfare framework. The motivation is stark: while …

Patrick J. Kennedy · Christine L. Dobridge · Paul Landefeld · Jacob Mortenson

This paper estimates the firm- and worker-level effects of the corporate income tax cuts in the 2017 Tax Cuts and Jobs Act (TCJA) — the largest corporate tax cut in U.S. history — to inform the …

Julien Acalin · Laurence Ball

The fall in the US federal debt-held-by-the-public/GDP ratio from a postwar peak of 106% in fiscal year 1946 to a trough of 23% in 1974 is widely cited (Elmendorf-Mankiw, Krugman) as evidence that an …

Philipp Hochmuth · Per Krusell · Kurt Mitman

This paper investigates how the EU's Fit-for-55 climate package will affect aggregate output and distribute its costs across the income distribution. The question matters because energy is a necessity …

Eric Jondeau · Gregory Levieuge · Jean-Guillaume Sahuc · Gauthier Vermandel

This paper asks whether public subsidies to green-technology producers, financed by a carbon tax, can materially reduce the macroeconomic cost of reaching net-zero CO2 emissions by 2060. The …

Christian Bredemeier · Babette Jansen · Roland Winkler

This paper proposes a novel fiscal transmission channel through which government spending expansions reduce employer monopsony power in the labor market, generating larger fiscal multipliers and …

Junichi Fujimoto · David Lagakos · Mitchell VanVuren

This paper asks whether publicly funded ("free") secondary schooling in developing countries raises GDP per capita. The question is policy-relevant because many low-income countries — including Ghana, …

Vincenzo De Lipsis · Matteo Deleidi · Mariana Mazzucato · Paolo Agnolucci

This paper estimates the dynamic macroeconomic effects of US government R&D investment using a Structural Vector Autoregressive (SVAR) framework, with an extension to a Rational Expectations SVAR …

Nezih Guner · Christopher Rauh · Gustavo Ventura

Guner, Rauh, and Ventura document the scope, generosity, distributional impact, and time evolution of means-tested transfers to working-age US households, and provide parametric estimates of transfer …

Christiaan van der Kwaak

When central banks pay interest on reserves — as the Federal Reserve has done since October 2008 and as is standard operating procedure today — does financing fiscal stimulus by permanently expanding …

Tuo Chen · Chang-Tai Hsieh · Zheng (Michael) Song

Chen, Hsieh, and Song study the use of unofficial non-tariff barriers (NTBs) by China during the U.S.-China trade war of 2018–2019 and in the first year of the Phase 1 purchase agreement (2020). The …

Thomas Douenne · Albert Jan Hummel · Marcelo Pedroni

This paper asks whether inequality and redistributive taxation should make climate policy more or less ambitious, and how optimal carbon taxes interact with optimal income taxes when households differ …

Andrés Fernández · Daniel Guzman · Ruy Lama · Carlos Végh

Developing and emerging economies exhibit procyclical fiscal policy on both the spending and taxation sides: government expenditures expand in booms and contract in recessions, and tax rates fall in …

Weizheng Lai · Lixin Colin Xu · Li Yang

Research question and motivation: How do civil wars affect long-term development, and through which institutional mechanisms? The paper studies the Taiping Rebellion (1850-1864) in Qing China, one of …

Scott French · Tess M. Stafford

A large empirical literature uses micro data to estimate the intertemporal elasticity of substitution (IES) of labor supply, a parameter crucial for understanding business-cycle fluctuations in hours …

Sushant Acharya · Jess Benhabib

Research question and motivation: A central tenet of monetary policy is that aggressively raising nominal rates more than one-for-one with inflation (the Taylor principle) nips self-fulfilling …

Sjak Smulders · Sophie Zhou

This paper by Smulders and Zhou challenges the standard lock-in narrative for the slow green transition. The conventional explanation — path dependency in directed technical change (DTC) — is hard to …

Sakai Ando · Tamon Asonuma · Prachi Mishra · Alexandre Sollaci

Sovereign debt restructuring is a central tool for countries in debt distress, yet surprisingly little evidence exists on whether it actually reduces the debt-to-GDP ratio — the metric used in …

Hans A. Holter · Serhiy Stepanchuk · Yicheng Wang

This paper investigates how the level and progressivity of personal income taxes shape entrepreneurial activity in the United States, contributing empirical evidence, theoretical intuition, and a …

Robert J Barro · V V Chari

Barro and Chari (2024) revisit the long-standing debate over optimal capital income taxation, unifying the Chamley-Judd zero-tax result, the Straub-Werning positive-tax amendment, and the …

Katrine Jakobsen · Henrik Kleven · Jonas Kolsrud · Camille Landais · Mathilde Muñoz

Proposals to tax top wealth (e.g., Saez and Zucman, 2019) face a recurring objection in public debate: that the wealthy will emigrate en masse and, because many are entrepreneurs, their departure will …

Alessandra Fenizia · Nicholas Li · Luca Citino

This paper studies the cost-effectiveness of targeted payroll tax reductions as a tool for stimulating labor demand among marginalized workers, using a natural experiment from Italy. The motivation is …

Maximilian Konradt · Giacomo Mangiante

This paper asks whether carbon pricing through the EU Emissions Trading System (EU ETS) imposes economic costs that are unequally distributed across European regions, and whether those economic costs …

Thomas Bourany · Jordan Rosenthal-Kay

This paper asks who wins and loses from climate policies — carbon taxes, renewable subsidies, and carbon tariffs — across 193 heterogeneous countries, and by how much. The motivation is that the …

Titan Alon · Damien Capelle · Kazushige Matsuda

This paper proposes that university R&D is determined endogenously by competition for tuition and talented students in the market for higher education, and asks why universities fund research …

Maria Alsina-Pujols

This paper asks how the threat of forced climate migration — international displacement driven by climate-induced natural disasters — should alter optimal carbon taxation. The motivation is twofold.

Christiaan van der Kwaak · Sweder van Wijnbergen

Does fiscal stimulus still work when it is financed through a banking system that is undercapitalized and holds large quantities of risky domestic government bonds? This was a first-order policy …

Hiona Balfoussia · Harris Dellas · Dimitris Papageorgiou

This paper studies a transmission channel from sovereign fiscal weakness to banking performance that the literature has largely overlooked: government-provided deposit insurance, rather than banks' …

Marc Folch · Luca Mazzone

Folch and Mazzone ask how undergraduate student debt shapes three intertwined post-college decisions — whether to pursue a post-bachelor (graduate) degree, the trajectory of earnings, and whether/when …

Can Xu · Andreas Steiner

Research question and motivation: The paper asks whether and why the type of employment — specifically public-sector employment — affects household saving rates in China. This matters because Chinese …

Christoph Hambel · Frederick van der Ploeg

Research question and motivation: Central bankers, regulators, and investors increasingly worry about climate "transition risks" — abrupt shifts in climate policy, green technology breakthroughs, or …

Jasmina Hasanhodzic · Laurence J. Kotlikoff

Hasanhodzic and Kotlikoff ask a question prior work assumed away: how large is generational risk, and can pay-go Social Security actually mitigate it? Earlier studies (Diamond, Bohn, Krueger-Kubler, …

Sebastian Graves · Victoria Gregory · Lars Ljungqvist · Thomas J. Sargent

How does endogenizing retirement (career-length) choice change the labor-supply and human-capital implications of the canonical Heckman, Lochner, and Taber (1998a, HLT) life-cycle general-equilibrium …

Ricardo Duque Gabriel

Research question and motivation. Public procurement accounts for roughly one-third of government spending (12.6% of GDP and 30% of total government expenditures in OECD countries in 2019).

Filippo Pallotti · Gonzalo Paz-Pardo · Jiri Slacalek · Oreste Tristani · Giovanni L. Violante

This paper measures the heterogeneous first-order welfare effects of the 2021-2023 inflation surge across households in the four largest euro area countries (Germany, France, Italy, Spain). …

Marco Bassetto · David S Miller

Why do sudden inflations and currency crises occur, while symmetric sudden deflations never do? The paper asks whether treating nominal government bonds as analogous to ordinary corporate bonds — with …

Jason G. Cummins · Kevin A. Hassett · R. Glenn Hubbard

Cummins, Hassett, and Hubbard argue that standard tests of neoclassical investment models (tax-adjusted q and the user cost of capital) have performed poorly mainly because of severe measurement error …

Rüdiger Bachmann · Benjamin Born · Olga Goldfayn-Frank · Georgi Kocharkov · Ralph Luetticke · Michael Weber

The paper studies Germany's temporary 3 percentage-point VAT cut from July 1 to December 31, 2020 (standard rate 19%→16%, reduced rate 7%→5%), combining two causal identification strategies with …

Robert W. Hahn · Nathaniel Hendren · Robert D. Metcalfe · Ben Sprung-Keyser

This paper extends and applies the marginal value of public funds (MVPF) framework to evaluate the welfare consequences of 96 climate-related tax and spending policies in the United States. The MVPF …

Olivier Blanchard · Roberto Perotti

This paper by Olivier Blanchard and Roberto Perotti (QJE 2002; circulated from 1998) characterizes the dynamic effects of U.S. government spending and net tax shocks on output using a structural VAR …

Robert J. Barro

This 1974 Journal of Political Economy paper by Robert Barro asks whether an increase in government bonds raises households' perceived net wealth, and argues that within an overlapping-generations …

Minsu Chang · Hanbaek Lee

This paper investigates the fiscal multiplier of infrastructure investment, specifically by incorporating firm-level investment decisions — a dimension absent from prior literature. The central …

Farid Farrokhi · Ahmad Lashkaripour

Farrokhi and Lashkaripour (2025) study the interaction between trade policy and climate change. The central research question is whether and how countries can use trade policy — specifically import …

Robert M. Anderson · Haosui Duanmu

Anderson and Duanmu (2025) ask how general equilibrium (GE) interactions — factor reallocation across sectors, capital misallocation under climate uncertainty, and the distributional incidence of …

Valerie A. Ramey · Matthew D. Shapiro

This paper argues that the composition of government spending across sectors, not just its aggregate size, matters for its macroeconomic effects, because reallocating capital across sectors is costly. …

Jonathan Payne · Bálint Szőke · George Hall · Thomas J Sargent

This paper constructs a new dataset of US federal bond prices and uses it to estimate the full term structure of yields on gold-denominated US federal debt from 1791 to 1933 — the entire gold standard …

Victor Chernozhukov · Kaspar Wüthrich · Yinchu Zhu

Chernozhukov, Wüthrich, and Zhu propose a debiased synthetic control (SC) estimator and an accompanying self-normalized t-test for making inferences on the average treatment effect on the treated …

Olivier J. Blanchard

This paper builds a tractable model of an economy populated by finitely lived agents -- each facing a constant instantaneous probability of death p, with new cohorts continuously born -- and uses it …

Morten O. Ravn · Stephanie Schmitt-Grohé · Martín Uribe

If households form habits over individual goods rather than over a consumption aggregate, the demand a firm faces depends on its own past sales, its pricing problem becomes dynamic, and mark-ups turn …

Torsten Persson

Persson extends Diamond's (1965) overlapping-generations model of public debt to open economies, asking how a one-time, debt-financed tax cut to the currently young generation redistributes welfare …

Alan J Auerbach · Yuriy Gorodnichenko · Daniel Murphy

This paper estimates the distributional and social consequences of Department of Defense (DOD) contract spending using a city-level (CBSA) panel dataset spanning 2005–2016. The research question is …

Anastasiia Antonova · Gernot J. Müller

This paper asks how governments should optimally adjust sector-specific taxes in response to sectoral shocks when monetary policy cannot be tailored to individual sectors. The authors work within a …

Chang-Tai Hsieh

This paper tests the life-cycle/permanent-income hypothesis (LC/PIH) using payments from the Alaska Permanent Fund Dividend (PFD), which are large, regular, and known roughly six months before Alaskan …

Thomas Herndon · M. Ash · Robert Pollin

A critical replication of Reinhart and Rogoff's "Growth in a Time of Debt" using their own working spreadsheet, which identifies three separate problems -- an unexplained exclusion of early post-war …

John Sturm Becko · André Sztutman

Can income tax schedules be justified as utilitarian-optimal without adopting extreme normative assumptions about how household welfare should be measured? The paper proposes a welfare criterion …

Thomas R Covert · Ryan Kellogg

Covert and Kellogg study policies that aim to "keep carbon in the ground" by blocking fossil fuel infrastructure investment, with the Dakota Access Pipeline (DAPL) as their empirical application. DAPL …

Valerie A. Ramey · Sarah Zubairy

Using a newly constructed quarterly US data set spanning 1889–2015 — built specifically to include the large wars and deep recessions that the post-WWII sample most of the literature relies on simply …

Carmen M Reinhart · Kenneth S Rogoff

Sorting about 3,700 annual observations from 44 countries over roughly two centuries into four debt-to-GDP buckets, the authors find little relationship between public debt and growth below 90 percent …

Xincheng Qiu · Nicolò Russo

The paper provides the most comprehensive cross-country empirical characterisation of effective income tax functions to date, estimating the two-parameter log-linear tax function — pioneered by …

Kai Gehring · Paul Schaudt

This paper provides quasi-experimental evidence that Index-Based Livestock Insurance (IBLI) — a remote-sensing-triggered, automated payout scheme for pastoralists — substantially reduces …

Guillermo A. Calvo · Andrés Velasco

Calvo and Velasco study an economy where both money and government bonds provide liquidity services, and they show that this shared role implies bond-financed fiscal expansions can be neutral or …

Daniel Lewis · Davide Melcangi · Laura Pilossoph

Lewis, Melcangi, and Pilossoph estimate the unconditional distribution of the marginal propensity to consume (MPC) using the 2008 Economic Stimulus Act (ESA) rebate payments, deploying Gaussian …

Kozo Ueda

This paper asks whether heterogeneity in the marginal propensity to consume (MPC) stems from temporary circumstances (e.g., transient wealth shocks that tighten liquidity) or persistent personal …

Alan J. Auerbach · Yuriy Gorodnichenko

This 2012 American Economic Journal: Economic Policy paper by Alan Auerbach and Yuriy Gorodnichenko estimates how government spending multipliers vary with the state of the business cycle, using a …

Jacob D Orchard · Valerie A Ramey · Johannes F Wieland

Do the high marginal propensities to consume (MPCs) estimated in the leading household studies of the 2008 U.S. tax rebates—particularly Parker et al. (2013), which found MPCs of 50–90 percent within …

Sebastian Schmidt

The paper builds a discrete-time DSGE model with Calvo sticky prices in which the public sector has two feedback rules that can hit corners, generating endogenous shifts between an "orthodox" regime …

Peter A. Diamond

This 1965 American Economic Review paper by Peter Diamond extends Samuelson's pure consumption-loan model by adding a produced, durable capital good, so that people can provide for retirement either …

Jonathan A. Parker

This 2011 *Journal of Economic Literature* forum essay by Jonathan Parker argues that as of early 2009 economists had no good measure of how government spending affects output specifically in a …

Jan Eeckhout · Chunyang Fu · Wenjian Li · Xi Weng

This paper asks whether and how optimal income taxation should change when firms have market power. The question is motivated by the documented rise in economy-wide markups since 1980, which has …

Christopher L. House · Matthew D. Shapiro

This paper by Christopher House and Matthew Shapiro (AER 2006; NBER WP 10415, April 2004) uses a dynamic general equilibrium model to quantify how the *timing* of a legislated tax-rate change -- not …

Beat Hintermann · Beaumont Schoeman · Joseph Molloy · Thomas Götschi · Alberto Castro · Christopher Tchervenkov · Uros Tomic · Kay W Axhausen

This paper reports on the MOBIS experiment, a large-scale randomized controlled trial (RCT) implementing a multi-modal Pigovian transport pricing scheme in urban areas of German- and French-speaking …

Stefano DellaVigna · Woojin Kim

DellaVigna and Kim study the innovation and diffusion of policies across U.S. states using a dataset of over 700 state laws spanning seven decades.

Peter Maxted · David Laibson · Benjamin Moll

Maxted, Laibson, and Moll study fiscal and monetary policy in a partial-equilibrium heterogeneous-agent model in which homeowners have present-biased time preferences (Instantaneous Gratification …

Lassi Ahlvik · Jørgen Juel Andersen · Jonas Hveding Hamang · Torfinn Harding

This paper asks three questions about supply-side climate policies in the oil market: how do oil companies respond to production-based taxes; what are the aggregate effects of such taxes on global CO2 …

Ojasvita Bahl · Chetan Ghate · Debdulal Mallick

Governments in emerging market and developing economies (EMDEs) routinely intervene in agricultural markets — procuring grain and redistributing it to poor households — in response to food price …

Andrew B. Abel · Stavros Panageas

The paper addresses two questions about government debt rollover. First, a positive question: what is the maximum ratio of government bonds to capital that can be sustained forever without any primary …

Oleg Itskhoki · Dmitry Mukhin

Itskhoki and Mukhin develop a tractable open-economy model with financial market segmentation — in which only the government sector (including state banks and exporting firms) can intermediate …

François Le Grand · Alaïs Martin-Baillon · Xavier Ragot

Should monetary policy deviate from price stability to address redistributive concerns in an economy with heterogeneous agents? The paper jointly solves for optimal monetary and fiscal policy under …

Xiaoming Li · Zheng Liu · Yuchao Peng · Zhiwei Xu

This paper asks how changes in the composition (not the size) of Chinese local government debt influence bank risk-taking, credit allocation between privately owned enterprises (POEs) and state-owned …

Karel Mertens · Morten O. Ravn

This paper by Karel Mertens and Morten Ravn (AER 2013) estimates the dynamic effects of U.S. federal personal and corporate income tax changes using a new estimator that treats narratively identified …

Luigi Iovino · Thorsten Martin · Julien Sauvagnat

This paper documents and quantifies an "environmental bias" embedded in the U.S. corporate income tax code: CO2-intensive ("dirty") firms systematically face lower effective tax rates than clean …

Christina D. Romer · David H. Romer

This paper develops a narrative method for identifying postwar U.S. tax changes that are plausibly uncorrelated with other influences on output, in order to get around the omitted-variable bias that …

Thomas F. Cooley · Gary D. Hansen

Extending their 1989 cash-in-advance real-business-cycle model, Cooley and Hansen add distorting taxes on labor and capital income and no-uncertainty perfect foresight to study the fiscal consequences …

Lawrence J. Christiano · Richard M. Todd

Investment projects begin with a long planning phase that consumes very little in the way of resources, and building that phase into an otherwise standard real business cycle model delays the response …

Lu Han · L. Rachel Ngai · Kevin D. Sheedy

Using sales and leasing transaction records for the Greater Toronto Area (2006–2018), this paper finds three novel effects of a higher property transaction tax: higher buy-to-rent transactions …

Christian Hellwig · Nicolas Werquin

Two of the most influential results in optimal tax theory — Saez's (2001) formula for the top income tax rate and Atkinson and Stiglitz's (1976) case for not taxing savings — are usually invoked …

Daniel Björkegren · Joshua E Blumenstock · Samsun Knight

This paper asks a fundamental question about policy design: when a program prioritizes one group over another, is that because the group benefits more from the intervention, or because the policy …

Barbara Biasi · Julien Lafortune · David Schönholzer

This paper investigates which types of school facility investments benefit students (as measured by test scores) and are valued by homeowners (as measured by house prices), and for which student …