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Fiscal Illusion around the World

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  • Roberto Dell’Anno

    ()
    (Department of Economic, Business, Legal, Commodity and Geographical Sciences, University of Foggia, Italy)

  • Paulo Mourao

    (Department of Economics, University of Minho, Braga, Portugal)

Abstract

This article estimates the magnitude of fiscal illusion around the world and evaluates whether relationships exist between fiscal illusion and a set of potential observed variables. The index of fiscal illusion is derived for approximately fifty countries over the period 2000–08. Using MIMIC models, the authors conclude that the structure of employment (self-employment as a percentage of total employment) and nominal marginal tax rates, by increasing the visibility of the tax burden, may constitute the greatest incentives for policy makers to distort taxpayers' perceptions. Less relevant are the determinants of fiscal illusion related to the information acquisition and processing capabilities of the taxpayer (i.e., freedom of the press and tertiary education).

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Bibliographic Info

Article provided by in its journal Public Finance Review.

Volume (Year): 40 (2012)
Issue (Month): 2 (March)
Pages: 270-299

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Handle: RePEc:sae:pubfin:v:40:y:2012:i:2:p:270-299

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Related research

Keywords: fiscal illusion; financial illusion; structural equation approach; mimic model;

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Cited by:
  1. Buehn, Andreas & Dell'Anno, Roberto & Schneider, Friedrich, 2012. "Fiscal illusion and the shadow economy: Two sides of the same coin?," MPRA Paper 42531, University Library of Munich, Germany.
  2. Facchini, Francois, 2014. "The determinants of public spending: a survey in a methodological perspective," MPRA Paper 53006, University Library of Munich, Germany.
  3. Dell'Anno, Roberto & Dollery, Brian, 2012. "Comparative fiscal illusion: A fiscal illusion index for the European Union," MPRA Paper 42537, University Library of Munich, Germany.
  4. Roberto Dell’Anno & Jorge Martinez-Vazquez, 2013. "A Behavioral Local Public Finance Perspective on the Renter’s Illusion Hypothesis," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper1303, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  5. H. Spencer Banzhaf & Wallace E. Oates, 2012. "On Fiscal Illusion and Ricardian Equivalence in Local Public Finance," NBER Working Papers 18040, National Bureau of Economic Research, Inc.

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