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The Role of Beliefs for the Sustainability of the Fiscal Constitution

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  • Neumärker, Karl Justus Bernhard
  • Pech, Gerald

Abstract

Why does the government not defect from the constitution? This article focuses on the dynamic restraints the government faces under the rule of law: violations against unconstitutional laws are not punished under the constitution. If a violating government cannot commit itself never to reinstall the constitution enforcing an unconstitutional law becomes difficult. Citizens? expectations to go unpunished when not complying may be self-fulfilling. Deriving the equilibrium of a global game we show that this mechanism is effectively deterring a government from defecting from a constitutionally permissible tax rate.

Suggested Citation

  • Neumärker, Karl Justus Bernhard & Pech, Gerald, 2003. "The Role of Beliefs for the Sustainability of the Fiscal Constitution," CSLE Discussion Paper Series 2003-01, Saarland University, CSLE - Center for the Study of Law and Economics.
    • Handle: RePEc:zbw:csledp:200301
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    File URL: https://www.econstor.eu/bitstream/10419/23130/1/2003-01_fiscalconst.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    tax evasion; global games; selffulfilling expectations; dynamic policy restraints;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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