The Effects of Tax Shocks on Output: Not So Large, but Not Small Either
AbstractI argue that, on theoretical grounds, the discretionary component of taxation should be allowed to have different effects than the automatic response of tax revenues to macroeconomic variables. Based on a novel dataset, I show two results. First, responses to a tax shock that allow for a distinction between the discretionary and the endogenous components of tax changes are about halfway between the large effects estimated by Romer and Romer (2010) and the smaller effects estimated, for instance, by Favero and Giavazzi (2012) or Blanchard and Perotti (2002). Second, there is almost no statistically significant evidence of anticipation effects. (JEL E23, E62, H22, H24, H25, K34)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Economic Policy.
Volume (Year): 4 (2012)
Issue (Month): 2 (May)
Find related papers by JEL classification:
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
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