Financial Stability News

News about financial stability and central banking

Lucas on taxes in Europe

WSJ had an interview with Nobel price winner Robert Lucas last weekend. There he suggested that the economic problems in Europe was due to the high (marginal) taxes, especially affecting the women labor participation rate negatively. He referred to research by Ed Prescott to substantiate this claim. There has been many reactions, among them this post in EView. It show that the evidence is actually the other way around, i.e. that the participation rates are highest in those countries with high marginal rates. So much for ideology and empirical work in economics!

 

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