Causation, Spending, and Taxes: Sand in the Sandbox or Tax Collector for the Welfare State?
AbstractCausal relations between federal expenditure and taxation are analyzed using an approach based on the invariance of econometric relationships in the face of structural interventions. Institutional evidence for interventions or changes of regime combined with econometric tests for structural breaks are used to investigate the relative stability of conditional and marginal probability distributions for each variable. The patterns of stability are the products of underlying causal order. The authors find two distinct causal structures operating in the postwar era. Before the mid-1960s, taxes appear to cause spending. After the late 1960s, taxes and spending are causally independent. Copyright 1992 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 82 (1992)
Issue (Month): 1 (March)
Other versions of this item:
- Kevin D. Hoover & Steven M. Sheffrin, 1990. "Causation, spending and taxes: sand in the sandbox or tax collector for the welfare state?," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
- Hoover, K.D. & Sheffrin, S.M., 1990. "Causation, Spending And Taxes: Sand In The Sandbox Or Tax Collector For The Welfare State," Papers 67, California Davis - Institute of Governmental Affairs.
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