The general equilibrium effects of fiscal policy

series: AMECO. The quarterly indicator is a sum of three components: 1) a series ofdirect taxes, with the annual data from AMECO and the quarterly data reconstructedusing as indicator the NA data on value added in the market sector; 2) a series ofindirect taxes, with the annual data from AMECO and the quarterly data reconstructedusing as indicator the NA data on private and public consumption; 3) a series of socialcontributions, with the annual data from AMECO and the quarterly data reconstructedusing as indicator the NA data for social contributions. HICP-deflated.Government employment (l g ) = public employees; source: AWM-ECB up to 1990:4and ECOUT thereafter.Tax rate on labor income (τ w ) = the annual series is computed in two steps: 1) anaverage direct tax rate (thh) is computed as :thh =T D h(OSP UE + P EI + W )(69)2) the labor tax rate is given byτ w = (thh W + SC + T w)(W + SC e )(70)where:T D h = households direct taxesOSP UE = Operating surplus of private unincorporated firmsP EI = household’s property and entrepreneurial incomeW = wagesSC = social contributionsT w = taxes on payroll and workforceSC e = employers social contributionsτ w is therefore a measure on how taxes and social contributions on labor (the numerator)affect the labor cost (the denominator). Sources for annual series: OECD RevenueStatistics and AMECO. The quarterly indicator for T D h is the same series on directtaxes used as indicator for T (see above). For wages and social contributions the indicatorsare the corresponding NA series. For OSP UE + P EI we use the NA profitseries.Tax rate on consumption (τ c ) = the annual series is given by the ratioτ c =T I 1 + T I 2(C + C g − T I 1 − T I 2 )(71)where:41