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Abstract

This paper presents an index of Fiscal Illusion for 68 democratic countries from 1960 to 2006. The theory of Fiscal Illusion studied relates to a wrong perception of government budget aggregates from the voters’ and taxpayers’ perspectives. In the construction of the index, methodological issues were carefully taken into account. The results obtained reveal that Fiscal Illusion varies greatly around the world. Countries such as Mali, Pakistan, Russia, and Sri Lanka have the highest average values over the time period considered, while Austria, Luxembourg, Netherlands, and New Zealand have the lowest. Regarding the time dimension, between 1980 and 1995 there was a significant decrease in the average value of the index across countries, suggesting a reduction in the adoption of Fiscal Illusion practices during this period. After 1995, the index remained stable in most countries.

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Bibliographic Info

Article provided by IEF in its journal Hacienda Pública Española/Revista de Economía Pública.

Volume (Year): 187 (2008)
Issue (Month): 4 (December)
Pages: 49-86

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Handle: RePEc:hpe:journl:y:2008:v:187:i:4:p:49-86

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Related research

Keywords: Fiscal Illusion; Indexes/Indicators; Democracy.;

Find related papers by JEL classification:

• C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data
• E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
• H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
• H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

References

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Cited by:

1. Pavel A. Yakovlev, 2011. "In uncertainty we trust: a median voter model with risk aversion," Financial Theory and Practice, Institute of Public Finance, vol. 35(4), pages 465-477.

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