American Economic Review: Vol. 92 No. 3 (June 2002)


Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter


AER - All Issues

AER Forthcoming Articles

Fiscal Policy, Profits, and Investment

Article Citation

Alesina, Alberto, Silvia Ardagna, Roberto Perotti, and Fabio Schiantarelli. 2002. "Fiscal Policy, Profits, and Investment ." American Economic Review, 92(3): 571-589.

DOI: 10.1257/00028280260136255


This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. We find a sizeable negative effect of public spending—and in particular of its wage component—on profits and on business investment. This result is consistent with different theoretical 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 those of taxes. Our results can explain the so-called "non-Keynesian" (i.e., expansionary) effects of fiscal adjustments. (JEL E22, E62)

Article Full-Text Access

Full-text Article


Alesina, Alberto (Department of Economics, Harvard University, 324 Littauer, Cambridge, MA 02138 and National Bureau of Economic Research, and Centre for Economic Policy Research)
Ardagna, Silvia (Department of Economics, Wellesley College, Wellesley, MA 02481)
Perotti, Roberto (Department of Economics, European University Institute, via dei Roccettini 9/16, 50016 San Domenico di Fiesole (FI), Italy, and CEPR)
Schiantarelli, Fabio (Department of Economics, Boston College, Chestnut Hill, MA 02467, and IZA)

American Economic Review

Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)


AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals

AEA Member Login:

AEAweb | AEA Journals | Contact Us