IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v22y1994i2p195-221.html
   My bibliography  Save this article

Reconsidering the Effects of Fiscal Policy On Private Sector Behavior: a Unifying View of Neutrality

Author

Listed:
  • Karen Smith Conway

    (University of New Hampshire)

Abstract

A careful analysis of the effects of fiscal policy must not only consider both sides of the fiscal policy equation—taxes and the resulting government spending—but must also specify the extent to which taxpayers use this equation in making decisions. This research develops a unifying framework for both static and intertemporal settings with which to clarify and critique a wide range of theoretical models offiscal policy. For instance, the neutrality results obtained in the literatures on voluntary contributions and Ricardian equivalence are shown to derive from the same implicit and perhaps questionable assumption: that the private sector knows that taxes paid will be returned in a form valued equally with the foregone income. And, if that assumption is correct, even more remarkable neutrality results can be established. More generally, what results from this examination is a much broader view of fiscal policy, a better understanding of when and why such policy will be neutral, and suggestions for ways to better explore empirically its effects on private sector behavior .

Suggested Citation

  • Karen Smith Conway, 1994. "Reconsidering the Effects of Fiscal Policy On Private Sector Behavior: a Unifying View of Neutrality," Public Finance Review, , vol. 22(2), pages 195-221, April.
    • Handle: RePEc:sae:pubfin:v:22:y:1994:i:2:p:195-221
    DOI: 10.1177/109114219402200203
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/109114219402200203
    Download Restriction: no
    File URL: https://libkey.io/10.1177/109114219402200203?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Snow, Arthur & Warren, Ronald S, Jr, 1989. "Tax Rates and Labor Supply in Fiscal Equilibrium," Economic Inquiry, Western Economic Association International, vol. 27(3), pages 511-520, July.
    2. Wildasin, David E, 1984. "On Public Good Provision with Distortionary Taxation," Economic Inquiry, Western Economic Association International, vol. 22(2), pages 227-243, April.
    3. Feldstein, Martin & Elmendorf, Douglas W, 1990. "Government Debt, Government Spending, and Private Sector Behavior Revisited: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 589-599, June.
    4. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    5. Gwartney, James & Stroup, Richard, 1983. "Labor Supply and Tax Rates: A Correction of the Record," American Economic Review, American Economic Association, vol. 73(3), pages 446-451, June.
    6. Barsky, Robert B & Mankiw, N Gregory & Zeldes, Stephen P, 1986. "Ricardian Consumers with Keynesian Propensities," American Economic Review, American Economic Association, vol. 76(4), pages 676-691, September.
    7. Lindbeck, Assar, 1982. "Tax Effects versus Budget Effects on Labor Supply," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 473-489, October.
    8. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
    9. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-127, March.
    10. Bernheim, B Douglas & Bagwell, Kyle, 1988. "Is Everything Neutral?," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 308-338, April.
    11. repec:eee:labchp:v:1:y:1986:i:c:p:3-102 is not listed on IDEAS
    12. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    13. A. B. Atkinson & N. H. Stern, 1974. "Pigou, Taxation and Public Goods," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(1), pages 119-128.
    14. Judd, Kenneth L, 1987. "A Dynamic Theory of Factor Taxation," American Economic Review, American Economic Association, vol. 77(2), pages 42-48, May.
    15. Boadway, Robin & Pestieau, Pierre & Wildasin, David, 1989. "Tax-transfer policies and the voluntary provision of public goods," Journal of Public Economics, Elsevier, vol. 39(2), pages 157-176, July.
    16. Rosen, Harvey S, 1976. "Tax Illusion and the Labor Supply of Married Women," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 167-172, May.
    17. Abel, Andrew B., 1986. "The failure of Ricardian equivalence under progressive wealth taxation," Journal of Public Economics, Elsevier, vol. 30(1), pages 117-128, June.
    18. Bernheim, B Douglas, 1986. "On the Voluntary and Involuntary Provision of Public Goods," American Economic Review, American Economic Association, vol. 76(4), pages 789-793, September.
    19. Chan, Louis Kuo Chi, 1983. "Uncertainty and the neutrality of government financing policy," Journal of Monetary Economics, Elsevier, vol. 11(3), pages 351-372.
    20. Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December.
    21. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
    22. Quintieri, Beniamino & Rosati, Furio Camillo, 1988. "Fiscal Policy and Labor Supply," Public Finance = Finances publiques, , vol. 43(3), pages 425-439.
    23. Todd Sandler & John Posnett, 1991. "The Private Provision of Public Goods: a Perspective on Neutrality," Public Finance Review, , vol. 19(1), pages 22-42, January.
    24. Wilde, James A, 1984. "Labor Supply and Tax Rates: Comment," American Economic Review, American Economic Association, vol. 74(5), pages 1103-1107, December.
    25. Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486, September.
    26. Fremling, Gertrud M & Lott, John R, Jr, 1989. "Deadweight Losses and the Saving Response to a Deficit," Economic Inquiry, Western Economic Association International, vol. 27(1), pages 117-129, January.
    27. Charles T. Clotfelter, 1985. "Federal Tax Policy and Charitable Giving," NBER Books, National Bureau of Economic Research, Inc, number clot85-1.
    28. repec:eee:labchp:v:1:y:1986:i:c:p:103-204 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    2. Roberto Ricciuti, 2003. "Assessing Ricardian Equivalence," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 55-78, February.
    3. Koumparoulis, Dimitrios, 2006. "Ευρωπαϊκή Δημοσιονομική Πολιτική Και Οικονομική Μεγέθυνση: Η Νεοκλασική Οικονομική Θεωρία Για Την Περίπτωση Της Ελλάδας [European Fiscal Policy and Economic Growth: The Neoclassical Economic Theory," MPRA Paper 44310, University Library of Munich, Germany.
    4. Francesco Forte & Cosimo Magazzino, 2015. "Ricardian equivalence and twin deficits hypotheses in the euro area," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 17(2), pages 148-166, October.
    5. Dennis Coates, 1996. "A Diagrammatic Demonstration of Public Crowding-Out of Private Contributions to Public Goods," The Journal of Economic Education, Taylor & Francis Journals, vol. 27(1), pages 49-58, January.
    6. Huseyin Yildirim & Alvaro Name Correa, 2011. "A Theory of Charitable Fund-Raising with Costly Solicitations," Levine's Working Paper Archive 786969000000000222, David K. Levine.
    7. Shaghil Ahmed & Dean Croushore, 1996. "The Marginal Cost of Funds With Nonseparable Public Spending," Public Finance Review, , vol. 24(2), pages 216-236, April.
    8. B. Douglas Bernheim, 1987. "Ricardian Equivalence: An Evaluation of Theory and Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 263-316, National Bureau of Economic Research, Inc.
    9. Charles L. Ballard & Don Fullerton, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-131, Summer.
    10. Bolton, Gary E. & Katok, Elena, 1998. "An experimental test of the crowding out hypothesis: The nature of beneficent behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 315-331, November.
    11. Kostas Drakos, 2001. "Testing the Ricardian Equivalence Theorem: Time Series Evidence from Greece," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 26(1), pages 149-160, June.
    12. Waqas, Muhamad & Awan, Masood Sarwar & Aslam, Muhammad Amir, 2011. "We are living on the cost of our children," MPRA Paper 32044, University Library of Munich, Germany.
    13. Hrushikesh Mallick, 2008. "Do remittances impact the economy? Some empirical evidences from a developing economy," Centre for Development Studies, Trivendrum Working Papers 407, Centre for Development Studies, Trivendrum, India.
    14. D. Sirin Saracoglu & Terry L. Roe, 2004. "Rural-urban Migration and Economic Growth in Developing Countries," 2004 Meeting Papers 241, Society for Economic Dynamics.
    15. Parry, Ian W.H., 1999. "Tax Deductions, Consumption Distortions, and the Marginal Excess Burden of Taxation," Discussion Papers 10801, Resources for the Future.
    16. Romano, Richard & Yildirim, Huseyin, 2001. "Why charities announce donations: a positive perspective," Journal of Public Economics, Elsevier, vol. 81(3), pages 423-447, September.
    17. Erik Schokkaert & Luc Ootegem, 2000. "Preference Variation and Private Donations," International Economic Association Series, in: L.-A. Gérard-Varet & S.-C. Kolm & J. Mercier Ythier (ed.), The Economics of Reciprocity, Giving and Altruism, chapter 3, pages 78-95, Palgrave Macmillan.
    18. Chan, Kenneth S. & Godby, Rob & Mestelman, Stuart & Andrew Muller, R., 2002. "Crowding-out voluntary contributions to public goods," Journal of Economic Behavior & Organization, Elsevier, vol. 48(3), pages 305-317, July.
    19. Roman M. Sheremeta & Neslihan Uler, 2021. "The impact of taxes and wasteful government spending on giving," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 355-386, June.
    20. Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1997. "Volunteer work and club size: Nash equilibrium and optimality," Journal of Public Economics, Elsevier, vol. 65(1), pages 9-22, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:22:y:1994:i:2:p:195-221. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.