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Fiscal Illusion at the Local Level: Empirical Evidence for the Flemish Municipalities

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  • Heyndels, Bruno
  • Smolders, Carine

Abstract

Fiscal illusion refers to a systematically biased perception of fiscal parameters due to demand-side error/ignorance or supply-side abusive behavior. As such, it is a component of a more general tax choice framework. This paper focuses predominantly on the empirical estimation of the four major sources of fiscal illusion, namely the flypaper effect, renter illusion, and the complexity and elasticity of tax systems. The results--based on a data set of 302 Flemish municipalities--on balance suggest the existence of important illusionary effects. Copyright 1994 by Kluwer Academic Publishers

Suggested Citation

  • Heyndels, Bruno & Smolders, Carine, 1994. "Fiscal Illusion at the Local Level: Empirical Evidence for the Flemish Municipalities," Public Choice, Springer, vol. 80(3-4), pages 325-338, September.
    • Handle: RePEc:kap:pubcho:v:80:y:1994:i:3-4:p:325-38
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    Cited by:

    1. Jens Blom-Hansen, 2005. "Renter Illusion: Fact or Fiction?," Urban Studies, Urban Studies Journal Limited, vol. 42(1), pages 127-140, January.
    2. Jean François Richard & Henry Tulkens & Magali Verdonck, 2006. "Tax Interaction Dynamics Among Belgian Municipalities 1984-1997," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 534-556, Springer.
    3. Hammed Amusa & Robert Mabunda & Ramos Mabugu, 2008. "Fiscal Illusion At The Local Sphere: An Empirical Test Of The Flypaper Effect Using South African Municipal Data1," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 443-465, September.
    4. F. Forte, 1997. "The measurement of 'fiscal burden' on GDP instead than on national net value added produced: a chapter in fiscal illusion," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 50(202), pages 337-375.
    5. Brian Dollery & Andrew Worthington, 1999. "Fiscal Illusion at the Local Level: An Empirical Test Using Australian Municipal Data," The Economic Record, The Economic Society of Australia, vol. 75(1), pages 37-48, March.
    6. Allers, Maarten & de Haan, Jakob & Sterks, Cees, 2001. "Partisan Influence on the Local Tax Burden in the Netherlands," Public Choice, Springer, vol. 106(3-4), pages 351-363, March.
    7. Rashidul Islam Sheikh, 2019. "Analysis of the Determinants of Public Education Expenditures in Bangladesh," Journal of Public Administration and Governance, Macrothink Institute, vol. 9(3), pages 151-178, December.
    8. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.
    9. Rhee, Pil-Woo, 1998. "Fiskale Illusion und Glory Seeking am Beispiel Koreas (1960 - 1987): Eine Fallstudie," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 98-2, University of Cologne, FiFo Institute for Public Economics.
    10. Oates, Wallace E., 2005. "Property taxation and local public spending: the renter effect," Journal of Urban Economics, Elsevier, vol. 57(3), pages 419-431, May.
    11. Lars Feld & Christoph Schaltegger, 2005. "Voters AS A Hard Budget Constraint: On the Determination of Intergovernmental Grants," Public Choice, Springer, vol. 123(1), pages 147-169, April.
    12. Hammed Amusa & Ramos Mabugu & Robert Mabunda, 2008. "Fiscal Illusion at the Local Sphere: An Empirical Test of the Flypaper Effect using South African Municipal Data," Working Papers 072, Economic Research Southern Africa.
    13. Brunner, Eric J. & Ross, Stephen L. & Simonsen, Becky K., 2015. "Homeowners, renters and the political economy of property taxation," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 38-49.
    14. Roberto Dell'Anno & Vincenzo Maria De Rosa, 2013. "The Relevance of the Theory of Fiscal Illusion. The Case of the Italian Tax System," HISTORY OF ECONOMIC THOUGHT AND POLICY, FrancoAngeli Editore, vol. 2013(2), pages 63-92.
    15. Geys, Benny & Konrad, Kai A., . "Federalism and optimal allocation across levels of governance," Chapters in Economics,, University of Munich, Department of Economics.
    16. Ashworth, John & Heyndels, Bruno, 1997. "Politicians' preferences on local tax rates: An empirical analysis," European Journal of Political Economy, Elsevier, vol. 13(3), pages 479-502, September.
    17. Taeseop Yoon & Junseop Shim, 2016. "An empirical analysis of the fiscal impacts of changes in tax revenue multiplicity: Focusing on Florida county case," International Review of Public Administration, Taylor & Francis Journals, vol. 21(1), pages 21-36, January.
    18. Hotak, Nematullah & Kaneko, Shinji, 2022. "Fiscal illusion of the stated preferences of government officials regarding interministerial policy packages: A case study on child labor in Afghanistan," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 285-298.
    19. Lang (Kate) Yang, 2022. "Fiscal transparency or fiscal illusion? Housing and credit market responses to fiscal monitoring," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(1), pages 1-29, February.
    20. Roberto Dell’Anno & Paulo Mourao, 2012. "Fiscal Illusion around the World," Public Finance Review, , vol. 40(2), pages 270-299, March.
    21. Deborah A. Carroll, 2005. "Are State Governments Prepared for Fiscal Crises? A Look at Revenue Diversification during the 1990s," Public Finance Review, , vol. 33(5), pages 603-633, September.
    22. Francisco Bastida & Bernardino Benito & Maria-Dolores Guillamon, 2019. "Tax mimicking in Spanish municipalities: expenditure spillovers, yardstick competition, or tax competition?," Public Sector Economics, Institute of Public Finance, vol. 43(2), pages 115-139.
    23. Csontos, László, 1995. "Fiskális illúziók, döntéselmélet és az államháztartási rendszer reformja [Fiscal illusions, decision theory, and public sector reform]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1118-1135.

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