The question of how substitution of debt for taxes affects private sector wealth and consumption has long been an unresolved macroeconomic theory and policy dispute. The present study attempts to address this problem within a modified fiscal-illusion setting, by utilizing an explicit rational...

This paper shows that changes in effective tax rates on capital income, labour income and consumption affect the incentives that individuals have to work and to accumulate capital, depending on the tax structure of each country. These incentive effects can induce large differences in the time...

The focus of this paper is twofold. First, it examines the impact on work effort of changes in government purchases financed with lump-sum taxes, in a neoclassical framework, with respect to four industrialised countries. Second, it reconsiders the expenditure-work effort relationship in a...