Dimitris Papageorgiou

Market and Political Power Interactions in Greece: A Theory

In this paper, we develop a neoclassical growth model of market and political power interactions that captures the main features of the economic and political system of Greece and explains the weak economic growth of Greece in the last forty years. The model incorporates the insiders-outsiders labor market structure and the concept of an elite government. Outsiders form a group of workers that supply labor to a competitive private sector. And, insiders form a group of workers that enjoy market power in supplying labor to the public sector and influence the policy decisions of government, including those that affect the development and maintenance of public sector infrastructures. This leads to labor misallocation and inefficient fiscal policies. Thus, even though expanding public sector output has a positive effect on growth, eventually this is counterbalanced by the labor misallocation and inefficient tax policy outcomes leading to a growth reversal phenomenon. The model proposed in this paper may be applicable to other countries that have a similar politicoeconomic structure with Greece, namely other Southern European countries.

Bank Transaction Taxes: International Evidence and Potential Implications for Greece

This chapter studies a particular case of financial transaction tax, namely, the bank transaction tax—that is, a tax imposed on any payment, withdrawal, or transfer made via the banking system. We review the relevant academic literature on countries which have employed the tax. Moreover, we use Greece as a case study of what the bank transaction tax would imply for a peripheral euro-area economy during the crisis, both in the context of a meta-analysis of existing literature as well as using a micro-founded dynamic stochastic general equilibrium (DSGE) model with a detailed financial sector and an appropriate shock. We conclude that, while the bank transaction tax has some advantages, its imposition also has a number of negative implications.

The Greek great depression:a general equilibrium study of its drivers

This chapter provides a quantitative study of the main determinants of the Greek great depression since 2010. The authors use a medium-scale DSGE model calibrated to the Greek economy between 2000 and 2009 (the euphoria years that followed the adoption of the euro). Then, departing from 2010, simulations show that the fiscal policy mix adopted, jointly with the deterioration in institutional quality and, specifically, in the degree of protection of property rights, can explain essentially all the total loss in GDP between 2010 and 2015 (around 26%). In particular, the fiscal policy mix accounts for 14% of the total output loss, while the deterioration in property rights accounts for another 8%. It thus naturally follows that a less distorting fiscal policy mix and a stronger protection of property rights are necessary conditions for Greece’s economic recovery.