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Crowding-Out Hypothesis versus Ricardian Equivalence Proposition: Evidence from Literature

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  • Gumus, Erdal

Abstract

The size of government expenditure in an economy grows over time. To finance these expenditures, public incomes must grow as well. Given that tax revenues are not sufficient for such spending and levying, new taxes and/or increasing current tax rates are not politically desirable, the only option left is to borrow. The purpose of this paper is to survey the two most important approaches, "crowding-out hypothesis" and "Ricardian Equivalence proposition", in the literature, and evaluate the economic consequences of public borrowing.

Suggested Citation

  • Gumus, Erdal, 2003. "Crowding-Out Hypothesis versus Ricardian Equivalence Proposition: Evidence from Literature," MPRA Paper 42141, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42141
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    File URL: https://mpra.ub.uni-muenchen.de/42141/1/MPRA_paper_42141.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Crowding-out; crowding-in; Ricardian equivalence; government expenditure; public borrowing;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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