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The role of public spending and incomes policies for investment and equality-led development in the UK

The role of public spending and incomes policies for investment and equality-led development in the UK

Onaran, Özlem ORCID: 0000-0002-6345-9922, Nikolaidi, Maria and Obst, Thomas (2017) The role of public spending and incomes policies for investment and equality-led development in the UK. [Working Paper]

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Abstract

This policy brief presents how a mix of fiscal and labour market policies could affect growth, investment and public budget in the UK. Based on an econometric model, we simulate the joint impact of an increase in public spending by 1% of GDP (about £20bn per year) along with more progressive taxation (increasing effective tax burden on capital by 1% and decreasing tax burden on labour by 1%) and an increase in the wage share by 1% of GDP. As a result, GDP increases by 3.7%. Private investment increases as well by 0.7% as a ratio to GDP. The budget balance in the UK improves by 0.2% as a ratio to GDP. Inflation increases only slightly: the price level goes up by 1.8 percentage points. The effects are even more favourable if policies are implemented simultaneously together with our trade partners in the EU.

Item Type: Working Paper
Uncontrolled Keywords: Public investment; Wage share; Wage-led growth; Incomes policies; Progressive tax; Equality-led development; Europe
Subjects: H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 04 Apr 2017 10:23
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/16194

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