Vito Tanzi

International Monetary Fund · Fiscal Affairs Department

https://wiiw.ac.at/faces-of-convergence-p-4908.html Edited by István P. Székely The Faces of Convergence e-book is a collection of 34 short essays by people who made major contributions to the process of convergence in the countries that joined the EU in the three waves of eastern enlargement. Contributors come from business, government, banking, r...

On needed policies and on possible policies for crises countries

This paper discusses the fiscal and monetary policies that were adopted by the crisis countries. It challenges the commonly held view that the countries followed policies of ‘austerity’. It shows that in most countries there was far less reduction of public spending than reported or believed. This paper argues that the fiscal and monetary policies...

Over the past three decades the income distribution of various advanced countries and especially of Anglo-Saxon countries has become much more uneven than in earlier decades. Several theories have been advanced to explain this change. This paper focuses on the role played by changes that took place in the "architecture" of the income taxes. The cha...

This paper focuses on the economic and not on the political impact of corruption. Corruption delegitimizes the working of a market economy, as well as the outcomes of political processes. This paper highlights ways in which corruption, by distorting economic decisions and the working of the market economy, inevitably reduces a country’s rate of gro...

While Feldstein gave a lot of importance to the labor market, stressing that Europe’s was not a single market, and to the role of fiscal rules and of the existence of a central fiscal authority in the US, he ignored, or downplayed, other factors that might also be important. One of these is the specific arrangements that exist, within the US and wi...

There is an important aspect of the growth of public spending that has not attracted the attention that it deserves and that may be an important element of an exit strategy based on reducing public spending over the medium and long run. It is an aspect connected with what could be characterized as a “fundamental law of public expenditure growth ove...

There have been strong pressures on the European Central Bank to play the role of the traditional, rich and generous uncle, for some of the countries that use the euro. Many observers have been urging the ECB to buy, directly, from the issuing governments, or indirectly, through the secondary market, the bonds of the governments of the countries in...

From the time when the European Monetary Union was being created, several American economists, including prominently Milton Friedman and especially Martin Feldstein, in several academic and more popular articles, maintained that the EMU was a “structurally flawed project” that did not have much chance of success or survival. In the views of these a...

The creation of the European Monetary Union had given, at least in a statistical sense, large, additional fiscal space to the member countries, by sharply lowering the interest rates they had been paying on their public debt. This lowering of interest rates was in part more apparent than real, because it was due to the fall in nominal interest rate...

The Great Recession started, as a financial crisis, in the United States, connected with bad investments in the housing market. Soon it changed into an economic recession, and, finally, morphed into a fiscal crisis in an increasing number of countries. In spite of growing worries, so far it has not affected the cost of borrowing for the American go...

In this chapter we discuss some reasons why unemployment rates tend to remain high for a long time after the bursting of bubbles and why fiscal stimulus packages often tend to be disappointing in terms of job creation. This has clearly been the case in the most recent years in the countries that have experienced the Great Recession. The reason is m...

An empirical study co-authored by the author of this book — written for a seminar on public debt and fiscal policy in EMU, held at the European Commission in Brussels on 17 September 1999 at a time when EMU had just become official — concluded that: “A growing public debt appears to lead to higher direct taxes, lower public investment and, ultimate...

In evaluating some of the various policies that have been proposed by experts to deal with the crisis, some important factors must be considered. Some of these are discussed briefly below.

No data are available on the internal balance of payments of American states, or regions. If such data existed they would, for sure, show large disequilibria among the American states or regions, with surpluses in some and deficits in others, just as they do in Europe. For example, when the car industry got into trouble, Michigan, where much of car...

There have been suggestions that Germany should pursue more expansionary fiscal and more relaxed labor policies than other EMU countries. Various economists, including Martin Wolf, a commentator with the Financial Times, Jean Pisani-Ferry, an economist at Bruegel (a think tank in Brussels), and some others, have been proponents of Germany’s expansi...

Neither the measurement of fiscal deficits nor that of public debts is like the measurement of a person’s weight or height, for which there are clear, objective standards for measurements. It is often not easy to connect fiscal deficits with changes in public debt. The IMF has recently dealt again, officially, with the difficult question of “fiscal...

Vito Tanzi offers a truly comprehensive treatment of the economic role of the state in the twentieth and twenty-first centuries from a historical and world perspective. The book addresses the fundamental question of what governments should do, or have attempted to do, in economic activities in past and recent periods. It also speculates on what the...

Growing attention has been directed in recent years to the role of government. Governance in general and corruption in particular have been much discussed because of the way they affect, and are affected by, the role of government. Dictionaries

The decades immediately after World War Two saw: (a) the spreading of ideas, rightly or wrongly attributed to John Maynard Keynes, that called for a larger government role in the economy; (b) the growing popularity of socialism; and (c) the creation of the United Nations, an event that gave a global voice to the citizens of lowincome countries and...

This paper examines the impact of public spending on income distribution in OECD countries, paying attention in particular to the impact of the quality of education and public institutions. The paper assesses the efficiency of public spending in improving income distribution by using Data Envelopment Analysis. The empirical analysis shows the exist...

Paper delivered at the â??Vancouver Seminar: The Crisis Response and Road to Recoveryâ??, hosted by the Department of Finance and the Bank of Canada, November 30-December 1, 2009, Vancouver, Canada General Background In a note published a few years ago, in the Financial Times, (August 12, 2003), the author of this comment advanced the hypothesis th...

In this paper the focus of attention will be on the 30 countries that belong to the grouping that goes under the name of Organization for European Cooperation and Development (OECD). This international organization started as a European entity but over the years it has expanded its membership to include several countries from other continents. Its...

Soon the G20 group will meet again to continue its discussion of changes in the rules governing the international economy and the global, financial system. A danger is that, as time passes and as the world moves further away from the deepest point of the recent financial crisis, inertia will set in, lobbies will reacquire their past influence on le...

Public policies in Asian countries have a focus on development and growth with a very limited attention to redistribution and equity. As a consequence, these countries have a low …scal pressure and a "light" wel-fare state. We analyze the determinants of tax revenue and investigate the tax composition in a sample of eleven Asian countries. Politica...

This article discusses the economic role of the state as it evolved during the 20th century, starting with how current tax systems developed and how fiscal termites can weaken the foundations of tax systems, examining the spending side of the government role, and speculating on future developments, particularly in the Latin American context.

For at least three decades after World War II, there was little interest in fiscal decentralization. Because of the large growth in public spending that took place during that period, a growth that was mainly focused at the central government level, this was a period characterized by fiscal centralization in most countries. Starting in the late 197...

In this paper we examine the impact of public spending, education, and institutions on income distribution in advanced economies. We also assess the efficiency of public spending in redistributing income by using a DEA (Data Envelopment Analysis) nonparametric approach. We find that public policies significantly affect income distribution, notably...

This paper studies the theoretical and empirical implications of monetary policy making by committee under four different voting protocols. The protocols are a consensus model, where a supermajority is required for a policy change; an agenda-setting model, where the chairman controls the agenda; a dictator model, where the chairman has absolute pow...

This is the transcript of the Distinguished Lecture held by Professor Vito Tanzi at the Leon Kozminski Academy of Entrepreneurship and Management (WSPiZ) on March 29, 2001 year. Transcript reflects the character of the lecture, its liveliness and colloquial character. It is intended to preserve not only the message, but also the atmosphere of this...

The present paper is concerned with the relationship between the distribution of the tax burden on the one hand, and (a) the propensity to save as well as (b) the incentive to invest in underdeveloped economies on the other hand. The approach is one of analyzing the effects of a progressive income tax in the context of Duesenberry's theory of the c...

Collection of essays based on the outcome of CASE's 2005 international conference held in Warsaw. In this collection, several prominent economists discuss the five big challenges to the development of the European Union (EU). These are: the new European Constitution, European finances and the Euro, the need to boost economic growth, competition in...

Il volume affronta il tema del ruolo mutevole della finanza pubblica nel corso del ventesimo secolo, documentando l'enorme incremento della spesa pubblica riscontrato in tutti i paesi industrializzati. Gli autori ritengono che la crescita della spesa nei governi negli ultimi trentacinque anni non ha comportato un significativo addizionale benessere...

Among his many achievements, in his long career as a successful and influential economist, Mario Nuti has been one of the leading students of centrally-planned and transition economies. Better than most, he has fully understood the inner workings of these economies. I am sure he would agree that the three factors leading to the collapse of the cent...

This paper examines some of the challenges and opportunities for fi scal policy in the future. It starts by recalling the evolution of the modern tax system with the introduction of a progressive income tax and value-added taxes, and the consequent rise of government spending fi nanced from a widening revenue base. It then highlights the growing ro...

Over its existence the IMF has been an instrument with multiple objectives. The main objectives have been (a) surveillance over countries' economic policies; (b) occasional provision of financial resources for countries undergoing adjustment under a Fund-supported program; (c) technical assistance for structural reforms and for institution building...

Ces dernières années, le niveau d`imposition de nombreux pays en développement a évolué de façon spectaculaire sur des périodes relativement brèves. Ces changements ont été trop profonds et trop soudains pour qu`on puisse les imputer entièrement à une dégradation de l`administration fiscale ou à des modifications des facteurs qui traditionnellement...

La présente étude a plusieurs objets. Premièrement, elle présente une ébauche de théorie positive (donc ayant trait au monde réel) de l`intervention du secteur public. Deuxièmement, elle contient une analyse relativement approfondie de l`activité du secteur public dans neuf économies de marché de pays en développement d`Asie et décrit les liens ent...

En las comparaciones sobre el papel del gobierno en una economía suele tomarse como referencia la proporción de la recaudación impositiva o del gasto público en el producto interno bruto. Sin embargo, el gobierno utiliza frecuentemente otros instrumentos para cumplir sus objetivos. En el presente documento se analizan estos otros instrumentos, se m...

In this paper we analyse public sector efficiency in the new member states of the European Union compared to that in emerging markets. After a conceptual discussion of expenditure efficiency measurement issues, we compute efficiency scores and rankings by applying a range of measurement techniques. The study finds that expenditure efficiency across...

We compute public sector performance (PSP) and public sector efficiency (PSE) indicators, comprising a composite and seven sub-indicators, for 23 industrialised countries. The first four sub-indicators are “opportunity” indicators that take into account administrative, education and health outcomes and the quality of public infrastructure and that...

In this paper, we show that, contrary to common beliefs, over the past two decades several countries were able to reduce public spending by remarkable amounts. These countries did not seem to have suffered from these large reductions either in a macroeconomic sense, or in terms of lower values for socio-economic indicators. On the contrary, ambitio...

This paper discusses the theory and practice of counter-cyclical fiscal policy to draw conclusions relevant for the fiscal architecture of the European Union. It starts by reviewing major lines of criticism on counter-cyclical fiscal policy, such as the existence of various lags, versions of Ricardian equivalence, non-Keynesian effects of fiscal po...

Este documento surge a solicitud del Grupo Mercado Común del MERCOSUR, y presenta la recopilación de los trabajos presentados en la reunión del Diálogo Subregional de Viceministros sobre Armonización Tributaria en la ciudad de Buenos Aires, en junio de 2004. El documento contiene un capítulo inicial del Prof. Vito Tanzi sobre globalización y sistem...

We study the desirability of interventionist harmonization of legal standards across multiple, mutually interdependent jurisdictions which strive to adapt law to their local conditions as well as to synchronize it with other jurisdictions. In a setting where jurisdictions are privately informed about their local conditions, we contrast the regime o...

Esta presentación fue comisionado por la Red de Integración y Comercio del Diálogo Regional de Política para la Reunión Subregional del Cono Sur celebrada el día 22 de junio de 2004 en Buenos Aires. Modernos sistemas fiscales fueron creados mayormente entre el período de la Gran Depresión (en los 30) y la década de 1960 Fueron creados en un período...

This note discusses trade liberalization and trade taxes. The main issue should not be the reduction of trade taxes but of total tax revenue. By potentially changing the structure of the economy, trade liberalization will affect not just tax revenue but also the role of the state in the economy and, thus, also public spending. In this discussion th...

Recently, pressures for fiscal decentralization have increased in various parts of the world. When cultural, ethnic, or linguistic diversity characterizes a country's population, the justification for giving different regions more control over their political and economic decisions seems to acquire more legitimacy. Issues are discussed that are rel...

Social protection in industrial countries has been provided through regulations, tax expenditures, and public spending. This paper argues that globalization will affect the governments' ability to continue providing social protection at the level of recent decades. Specifically, tax competition among jurisdictions, ballooning electronic commerce, a...

Governments cannot integrate their countries into the global economy and protect the poor at the same time.

this paper is to discuss a range of issues related to fiscal decentralization, focusing in particular on possible alternatives to decentralization and various pitfalls that may be associated with it. Unlike much of the previous literature on the subject, therefore, this paper will pay less attention to the actual processes of decentralization and m...

1. "Making Welfare Work: the Politics of Reform", by Frank Field 2. "EU Enlargement and the Future of the Welfare State", by Hans-Werner Sinn and 3. "Globalization and the Future of Social Protection", by Vito Tanzi.

Fiscal Reform Over Ten Years of Transition Over the past decade, we have experienced what is arguably one of the largest economic experiments of this century. Many of the socialist countries that had a centrally planned economy embarked in a process of change aimed at transforming them into market economies. This transformation involved massive ch...

Faced by these termites, as well as by others that may yet appear in the future, many countries, particularly those with high tax rates, would be advised to prepare for what could be sharp declines in tax revenues. They should also begin to think about how the negative impact of globalization and new technology might be turned around to facilitate...

[fre] Les reformes fiscales en dix annees de transition Nous avons assiste pendant la derniere decennie a ce qui constitue certainement la plus importante experience economique de ce siecle. La plupart des pays socialistes dotes d’une economie a planification centrale ont entame un processus de changement visant a les transformer en economies de ma...

This paper deals with efficiency in the public sector. It argues that the habit of relating efficiency to public spending, as is generally done, may give wrong results when, as is often the case, public institutions use public assets (land, buildings, etc.) without imputing a cost for that use. The paper argues that, because of lack of incentives,...

The paper discusses some channels through which corruption affects growth such as the impact of corruption on enterprises, on the allocation of talent, and on investment. It also discusses the impact of corruption on some aspects of public finance.

Este artículo llega a la conclusión de que la calidad del sector público sólo puede evaluarse en relación con el papel del Estado. En general, un sector público eficiente debería poder alcanzar los objetivos del Estado, con la menor distorsión posible del mercado, con la carga tributaria más baja posible sobre los contribuyentes, con el menor númer...

This paper analyzes fiscal reforms in transition economies during the decade leading up to 1998. The paper argues that macroeconomic stabilization, price liberalization and privatization--he core reforms visualized by the shock therapy approach--are necessary but not sufficient conditions for a complete transition to a market economy. Further deep...

Part I. The Growth of Government: A Historical Perspective: 1. The growth of government since 1870 2. The composition of public expenditure 3. Revenue, deficits, and public debt Part II. Gains from the Growth of Public Expenditure: 4. Historical evidence on government performance 5. The size of government and its performance 6. The experience of th...

This paper discusses important tax policy issues facing developing countries today. It views tax policy from both the macroeconomic perspective, which focuses on broad questions such as the level and composition of tax revenue, and the microeconomic perspective, which focuses on certain design aspects of selected major taxes, such as the personal i...

This paper discusses issues to be considered in designing "second generation" reforms. These reforms should focus on improving the capacity of the public sector to implement economic policies. The paper contrasts these reforms with those known as first generation reforms, which essentially focused on macroeconomic policies. The paper discusses the...

This paper analyzes anew the relationship between taxation and the household saving rate. On the basis of standard savings and tax revenue data from OECD countries, it provides compelling and robust empirical evidence of a powerful impact of taxes on household savings. In particular, income taxes are shown to affect negatively the household saving...

This paper discusses important tax policy issues facing developing countries today. It views tax policy from both the macroeconomic perspective, which focuses on broad questions such as the level and composition of tax revenue, and the microeconomic perspective, which focuses on certain design aspects of selected major taxes, such as the personal i...

Productivity growth in virtually all west European countries exceeded that of the United States throughout the period 1950 to 1995. Since then American productivity performance has strengthened and that of the EU has weakened. The most important reason is contrasting experiences with Information and Communications Technology (ICT). The article argu...

ered valuable by at least a part of society (narcotics production and distribution, prostitution, gambling). These activities can be large in some countries and should be counted in the national accounts of all countries although they rarely are. Their omission affects the comparability of data across countries. The incomes generated by illegal act...

Trade liberalization has rightly been a central component in strategies for development. Tanzi 1989, Tanzi 1991 has highlighted the costs of trade restrictions, whether tariffs or quotas. The rapid push toward trade liberalization in transition countries may nonetheless not have been unambiguously positive because it is likely to have been costly i...

Corruption affects and distorts what should be arms’ length, or objective and unbiased, relationships between government officials and private sector individuals. Through the payment of bribes, some individuals succeed in getting favorable treatment in their economic activities from public officials. Such a treatment can either reduce the costs for...

Major changes will need to occur to complete the transition. Changes can be either superficial-essentially those envisaged by the shock-therapy approach-or deep, including creation of new institutions, changes in incentives, changes in processes, and transformation of the role of government. These deep changes are much more difficult and time-consu...

This paper discusses the fundamental determinants of inequality. These are identified as world or market forces, social norms, ownership of real and human capital, and the role of government. The change in the relative role of these factors in determining inequality during economic development is analyzed.