Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 12, 2017 erstellt
Beschreibung:
This paper empirically tests the Ricardian equivalence hypothesis with a narrative measure of tax shocks developed in a widely cited paper by Romer and Romer (2010). In addition, the paper also assesses the robustness of the size of the tax multiplier in the post-WWII period. The present value, at the time of legislation, of tax increases motivated solely by concerns for improving the fiscal health of the government is used for the tests. These tax news represent a switch from debt to tax financing that should have no effects on the economy if Ricardian equivalence holds as a good approximation. For the post-1980:IV period, I find evidence for fiscal anticipation as many of the tax increases are implemented with substantial delays and distortionary taxes increase economic activity before taxes go up, which is caused by intertemporal substitution. Therefore, Ricardian equivalence is rejected. Also, the tax multiplier crucially depends on the sample period and on fiscal anticipation. The analysis in this paper stays within the econometric framework of Romer and Romer (2010) in order to make the results directly comparable