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Retracing the preferences behind macroeconomic policy: The dutch experience

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Summary

The 1986 Central Economic Plan for The Netherlands presents a combination of policy adjustments which is considered to lead to a more satisfactory outcome for the Dutch economy than the central projection for the period up to 1990. This study is an attempt to reconstruct the preferences behind the alternative scenario as a starting point for optimisation exercises. It turns out that reducing the government deficit receives the highest priority, while economic growth has a relatively low weight. A further analysis suggests that, to some degree, the high priority to improving the government budget may be due to risk aversion. At relatively low cost in terms of the other target variables, unemployment could be reduced by creating more public sector employment, the main drawback being a fall in disposable income per employee.

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Additional information

This paper has grown out of the master's thesis of Annette Schrijver for the Technical University of Delft, which she wrote at the Central Planning Bureau. We have benefited from discussions with many colleagues. In particular we like to thank H. den Hartog, F.J.H. Don and V.R. Okker. The responsibility for the contents of this article rests entirely with the authors.

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Brandsma, A.S., Gelauff, G.M.M. & Hanzon, B. Retracing the preferences behind macroeconomic policy: The dutch experience. De Economist 136, 468–490 (1988). https://doi.org/10.1007/BF01803597

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Keywords

  • Public Sector
  • Risk Aversion
  • Main Drawback
  • Disposable Income
  • Target Variable