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...

A recent development in macroeconomic theory suggests that public investment "per se" is relevant to economic growth, without regard to the means of financing government activity. This study undertakes an empirical investigation of this proposition, comparing two subperiods of the manufacturing...

In this paper, it is shown 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...

In a simple macromodel of endogenous growth for 13 OECD countries, the effects of deficit financed tax cuts on output and tax revenue are examined and certain widely assumed properties of the Laffer curve are shown to hold for a portion only of the sample countries. The shape of the Laffer curve...

Advocates of supply-side economics contend that at least some of the economies are on the negatively sloped portion of the well-publicized Laffer curve, so that a lowering of tax rates will increase tax revenue and, thereby, reduce fiscal deficits in the long run. The purpose of this paper is to...