This paper discusses tax and expenditure policy reforms to raise employment. Using data for 58 advanced and emerging economies, the paper provides a unified assessment of tax and expenditure measures that have usually been addressed separately. The focus is on incentives to increase labor demand and supply rather than on the impact of fiscal policy on employment through aggregate demand effects. It also discusses policies to improve the matching of labor supply and demand, and the principles which should guide the design of country-specific fiscal reforms to boost employment. A comprehensive set of tables on fiscal policies and labor market outturns for advanced and emerging economies is provided, permitting cross-country comparisons to facilitate the design of reform strategies.

This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.

Would countercyclical fiscal policy during recessions improve or worsen the gender employment gap? We give an answer to this question by exploring the state-dependent impact of fiscal spending shocks on employment by gender in the G-7 countries. Using the local projection method, we find that, during recessions, a positive spending shock of 1 percent of GDP would, on average, lift female employment by 1 percent, while increasing male employment by 0.6 percent. Consequently such a shock would improve the female share of employment by 0.28 percentage point during recessions. Our findings are driven by disproportionate employment changes in female-friendly industries, occupations, and part-time jobs in response to fiscal spending shocks. The analysis suggests that fiscal stimulus, particularly during recessions, could achieve the twin objectives of supporting aggregate demand and improving gender gaps.

This paper examines the impact of fiscal policy on employment through the lenses of Okun’s Law. Looking at the panel of OECD countries over the past three decades, we find that fiscal policy can affect employment beyond the impact it is traditionally assumed to exert through the output multiplier. In particular, this impact is found to be effective for most items of current discretionary expenditure and for corporate income taxes and social security contributions. Okun’s Law is found to be stable under almost all model specifications, but higher spending on subsidies and lower social security contributions can amplify the impact of the output gap on employment gaps.

This paper examines the role of structural fiscal policies to promote female labor force participation and reduce gender gaps in labor markets in 26 OECD countries from 2000 to 2019. As both female labor force participation and many explanatory/control variables clearly exhibit non-stationarity (potentially leading to spurious regression results), we employ a panel vector error-correction model, in contrast with most previous empirical studies on this matter. Our analyses confirm statistically significant positive impacts of government spending on (1) early childcare and education, (2) active labor market programs, and (3) unemployment benefits, all of which would help encourage women to enter the labor force, while (4) an increase in relative tax rate on second earner could have negative impact on female labor force participation.

With growth weakening in many parts of the world and downside risks on the rise, fiscal consolidation remains challenging. However, considerable progress has been made in strengthening fiscal accounts following their sharp deterioration in 2008-09. This issue of the Fiscal Monitor takes stock of this progress, focusing on its size, composition, and implications for employment and social equity. The issue finds that most countries--and especially advanced economies--have made significant headway in rolling back fiscal deficits, but that efforts at controlling debt stocks are taking longer to yield results. The mix of revenue and expenditure policies employed by countries with sizable fiscal consolidation needs has differed, with advanced economies in general relying more on spending retrenchment than emerging markets and low-income countries. Both spending and revenue measures have important implications for employment and social equity, the issue finds, and these implications need to be taken into account if the large consolidation efforts underway are to be sustainable.

This publication is a survey by the IMF staff, published twice a year, in the spring and fall, as part of the IMF’s World Economic and Financial Surveys. The current issue analyzes the latest public finance developments, updates medium-term fiscal projections, and assesses policies aimed at placing public finances on a sustainable footing. An analytical chapter employs extensive firm-level data sets as well as new sources of data on tax policy and tax administration for advanced economies, emerging market economies, and low-income developing countries to assess the extent of resource misallocation within countries, focusing on how the design of the tax system may affect resource allocation.

Trapped in the Middle? investigates whether middle-income traps really exist and, in case they do, how these pitfalls are manifested, their causes, what economic policy measures are required to escape from them, and what international cooperation can do to support this process.

This report discusses fiscal trends in policies aimed at reducing fiscal vulnerabilities and boosting medium-term growth, recent fiscal developments and the fiscal outlook in advanced economies, emerging markets, and low-income developing countries; recent trends in government debt and analysis of changes in fiscal balances, revenue, and spending; potential fiscal risks; and growth from the fiscal policies. It also describes how digitalization can help governments improve implementation of current policy and widen the range of policy options, and opportunities and risks for fiscal policy, including improvements in policy implementation, the design of future policy, and how digitalization can create opportunities for fraud and increase government vulnerabilities.

Public sector balance sheets provide the most comprehensive picture of public wealth. They bring together all the accumulated assets and liabilities that the government controls, including public corporations, natural resources, and pension liabilities. They thus account for the entirety of what the state owns and owes, offering a broader fiscal picture beyond debt and deficits. Most governments do not provide such transparency, thereby avoiding the additional scrutiny it brings. Better balance sheet management enables countries to increase revenues, reduce risks, and improve fiscal policymaking. There is some empirical evidence that financial markets are increasingly paying attention to the entire government balance sheet and that strong balance sheets enhance economic resilience. This issue of the Fiscal Monitor presents a new database that shows comprehensive estimates of public sector assets and liabilities for a broad sample of 31 countries, covering 61 percent of the global economy, and provides tools to analyze and manage public wealth. Estimates of public wealth reveal the full scale of public assets and liabilities. Assets are worth US$101 trillion or 219 percent of GDP in the sample. This includes 120 percent of GDP in public corporation assets. Also included are natural resources that average 110 percent of GDP among the large natural-resource-producing countries. Recognizing these assets does not negate the vulnerabilities associated with the standard measure of general government public debt, comprising 94 percent of GDP for these countries. This is only half of total public sector liabilities of 198 percent of GDP, which also includes 46 percent of GDP in already accrued pension liabilities. Once governments understand the size and nature of public assets, they can start managing them more effectively. Potential gains from better asset management are considerable. Revenue gains from nonfinancial public corporations and government financial assets alone could be as high as 3 percent of GDP a year, equivalent to annual corporate tax collections across advanced economies. In addition, considerable gains could be realized from government nonfinancial assets. Public assets are a significant resource, and how governments use and report on them matters, not just for financial reasons, but also in terms of improving service delivery and preventing the misuse of resources that often results from a lack of transparency.