How to Achieve the Take-off into Sustained Growth: A Case Study for Slovenia

Neck, Reinhard, Weyerstrass, Klaus, Blueschke, Dmitri, Majcen, Boris, Srakar, Andrej and Verbic, Miroslav (2018) How to Achieve the Take-off into Sustained Growth: A Case Study for Slovenia. International Advances in Economic Research, 24 (2), pp. 109-121.

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Abstract or Table of Contents

In this paper, we show that successful policy aimed at enhancing economic growth in the long run must be based on policies which improve human capital and technological progress. This is applied to Slovenia, a small open economy in the European Union and the Euro Area. In particular, we investigate how fiscal policies should be designed to support economic growth without violating the European Union Stability and Growth Pact. Using the SLOPOL10 model, an econometric model of the Slovenian economy, we analyse the effects of different fiscal policies in Slovenia over the next ew years by means of simulations. The fiscal policy multipliers of the Slovenian economy are small and short- ived, which renders demand-side expansionary fiscal policies nappropriate as a means of achieving higher growth. However, if an increase in government expenditures directly related to technological progress is implemented (such as better funding for tertiary education or subsidies for firms’ investments in research and development), this can trigger a path of output which is permanently higher than that of the baseline simulation. Reducing income taxes and social security contributions has strong positive effects on employment. This result shows that the key to prosperity and sustained growth is investment in human capital and technology, also for a small open economy like Slovenia.

Item Type: Article in Academic Journal
Keywords: Macroeconomics; Stabilization policy; Fiscal policy; Tax policy; Public expenditures; Demand management; Supply side policies; Slovenia; Public debt
Funders: Fonds zur Förderung der Wissenschaftlichen Forschung Österreich FWF (Projekt-Nr. I 2764-G27), Slovenian Research Agency ARRS (contract no. 630-31/2016-1).
Classification Codes (e.g. JEL): JEL: E62, E17, E37
Research Units: Macroeconomics and Economic Policy
Status: Published
Date Deposited: 04 May 2018 08:38
Last Modified: 20 Feb 2019 13:09
URI: https://irihs.ihs.ac.at/id/eprint/4661

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